Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Adopt the Route QCT Cross Routing Option, 28477-28479 [2018-13084]

Download as PDF Federal Register / Vol. 83, No. 118 / Tuesday, June 19, 2018 / Notices 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–NASDAQ–2018–044 and should be submitted on or before July 10, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.23 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–13080 Filed 6–18–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–83425; File No. SR–CHX– 2018–001] Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Adopt the Route QCT Cross Routing Option June 13, 2018. I. Introduction On March 6, 2018, the Chicago Stock Exchange, Inc. (‘‘CHX’’ or ‘‘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 adopt the Route QCT Cross routing option. The proposed rule change was published for comment in the Federal Register on March 20, 2018.3 On May 1, 2018, 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 received no comment 23 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 82870 (March 14, 2018), 83 FR 12214 (‘‘Notice’’). 4 15 U.S.C. 78s(b)(2). 5 See Securities Exchange Act Release No. 83143, 83 FR 20123 (May 7, 2018). The Commission designated June 18, 2018, as the date by which the Commission shall approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change. daltland on DSKBBV9HB2PROD with NOTICES 1 15 VerDate Sep<11>2014 17:55 Jun 18, 2018 Jkt 244001 letters on the proposed rule change. This order institutes proceedings under Section 19(b)(2)(B) of the Exchange Act 6 to determine whether to approve or disapprove the proposed rule change. II. Description of the Proposed Rule Change Currently, under the Exchange’s rules, Routable Orders 7 submitted to the CHX matching system (‘‘Matching System’’) 8 for execution are routed away from the Matching System automatically if a Routing Event 9 is triggered. The Exchange’s current rules provide that all Routable Orders 10 are limit orders. Market 11 and cross orders 12 are never routable. The Exchange does not currently permit orders to be directly routed to an away Trading Center 13 without first being submitted to the Matching System. Because Qualifed Contingent Trade (‘‘QCT’’) Crosses 14 are exempt from the trade-through prohibition of Rule 611 of Regulation NMS,15 the Matching System permits QCT Crosses to trade-through protected quotes of away markets. Under the Exchange’s current rules, QCT Crosses are handled IOC 16 and can never rest on the CHX book. Moreover, a QCT Cross submitted to the Matching System will be cancelled back to the order sender as ‘‘blocked’’ if a precedent limit order priced at or better than the QCT Cross is resting on the CHX book,17 except that a QCT Cross priced at the top of the CHX book (i.e., the bestranked order on the CHX book pursuant to Article 20, Rule 8(b)) that qualifies for Cross With Size 18 handling will be permitted to execute. The Exchange has proposed to adopt the Route QCT Cross routing option, which will permit only Institutional 6 15 U.S.C. 78s(b)(2)(B). 7 See CHX Article 1, Rule 1(oo). 8 The Matching System is part of the Exchange’s ‘‘Trading Facilities,’’ as defined under CHX Article 1, Rule 1(z). 9 See CHX Article 19, Rule 3(a)(1)–(5). 10 See CHX Article 1, Rule 1(oo) defining ‘‘Routable Order.’’ 11 See CHX Article 1, Rule 2(a)(3) defining ‘‘market order.’’ 12 See CHX Article 1, Rule 2(a)(2) defining ‘‘cross order.’’ 13 See CHX Article 1, Rule 1(nn) defining ‘‘Trading Center.’’ 14 QCT Crosses are cross orders that are component orders to Qualified Contingent Trades that are submitted by an Institutional Broker. See CHX Article 1, Rule 2(b)(2)(E) defining ‘‘Qualified Contingent Trade.’’ See also CHX Article 1, Rule 2(a)(2) defining ‘‘cross order.’’ 15 See Securities Exchange Act Release No. 57620 (April 4, 2008), 73 FR 19271 (April 4, 2008). 16 See CHX Article 1, Rule 2(a)(2) 17 See CHX Article 1, Rule 2(a)(2). See also CHX Article 20, Rule 8(e)(1). 18 See CHX Article 1, Rule 2(g)(1). PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 28477 Brokers (‘‘IBs’’) 19 to directly route a QCT Cross to a non-affiliated third-party broker-dealer designated by the IB (‘‘designated executing broker’’) for execution. Route QCT Cross orders will be handled like current Routable Orders,20 except that the Route QCT Cross order will never be submitted to the Matching System for execution. Specifically, upon receipt of a Route QCT Cross order, the Exchange will cause the order to be routed IOC 21 from the Exchange, through CHXBD, LLC (‘‘CHXBD’’), the Exchange’s affiliated routing broker, to the designated executing broker identified by the IB.22 The Exchange states that the relationship between a designated executing broker and CHXBD will be governed by applicable CHX Rules 23 and customary interbroker agreements, such as fully-disclosed clearing and customer agreements. The Exchange represents that at all times, the use of Route QCT Cross will be optional.24 The Exchange also states that Route QCT Cross is similar to the routing options available on the Nasdaq Stock Market 25 and Cboe BYX and Cboe BZX exchanges.26 Specifically, the Exchange has proposed to adopt proposed Article 19, Rule 4 (Routing Options) to provide that routing options may be combined with all available order types, modifiers and related terms, except for order types, modifiers, and related terms that are inconsistent with the terms of a routing option, and that the Exchange may activate or deactivate any routing option at its discretion and, if practicable, after notice to Participants.27 Article 19, Rule 4(a)(1) provides that Route QCT Cross is 19 The Exchange states that it has proposed to limit use of Route QCT Cross to IBs to be consistent with the fact that only IBs are currently permitted to submit QCT Crosses to the Matching System. See CHX Article 1, Rule 2(b)(2)(E). 20 See CHX Article 1, Rule 1(oo). 21 See CHX Article 1, Rule 2(a)(2). 22 The Exchange states that IBs will be permitted to identify only one designated executing broker to which all Route QCT Cross orders submitted by the IB will be routed, subject to additional requirements, as described below. 23 See e.g., CHX Article 19, Rule 2(a). 24 See Notice, supra note 3 at 12215. 25 See id. The Exchange states that like Route QCT Cross, the ‘‘Directed Order’’ routing option offered by the Nasdaq Stock Market (‘‘Nasdaq’’) permits an order sender to route an order to another market center while bypassing the Nasdaq’s order book, which may result in the routed order executing at a price through Nasdaq’s top of book. See id. 26 The Exchange states that like Route QCT Cross, the ‘‘DRT’’ routing option offered by the Cboe BYX and Cboe BZX exchanges permits an order to be routed to one or more away alternative trading systems. See id. 27 See CHX Article 1, Rule 1(s). E:\FR\FM\19JNN1.SGM 19JNN1 28478 Federal Register / Vol. 83, No. 118 / Tuesday, June 19, 2018 / Notices daltland on DSKBBV9HB2PROD with NOTICES a routing option,28 which may only be utilized by IBs, that instructs the Exchange to route a cross order marked QCT directly to a non-affiliated thirdparty broker-dealer designated by the IB without submitting the order into the Matching System for execution. In addition, each IB is permitted to identify only one designated executing broker to which all Route QCT Cross orders submitted by the IB would be routed. Furthermore, the Exchange represents that prior to the Exchange accepting any Route QCT Cross orders directed to a specific designated executing broker, the Exchange would confirm that the designated executing broker has established connectivity to the Exchange’s routing systems.29 In addition, the IB would be responsible for all away execution fees resulting from the execution of Route QCT Cross orders, including any guaranteed payments to its designated executing broker.30 Moreover, Route QCT Cross orders would be routed IOC and a Route QCT Cross order that could not be executed by a designated executing broker, for any reason, would be cancelled back to the original order sender.31 As Route QCT Cross orders would be routed away from the Exchange without being submitted to the Matching System for execution, the Exchange proposes to amend Article 19, Rules 1(a) and (c), and Rule 2(a) to replace the term ‘‘Matching System’’ with ‘‘Exchange.’’ Moreover, since Route QCT Cross orders are a subset of cross orders that will not be handled IOC upon receipt by the Exchange, and all cross orders currently received by the Exchange are deemed to have been received IOC, the Exchange proposes to amend the definition of ‘‘cross orders’’ under Article 1, Rule 2(a)(2) to provide that all cross orders submitted to the Matching System for execution shall be deemed to have been received IOC. The Exchange has also proposed to amend Article 19, Rule 3(a) to provide that a Routable Order that is submitted to the Matching System would be routed away from the Matching System pursuant to the CHX Routing Services if a Routing Event is triggered.32 28 In addition, since the cross orders are not currently Routable Orders, the Exchange has proposed to amend Article 1, Rule 1(oo) by adopting paragraph (oo)(2), which would expand the definition of Routable Orders to include any order marked by a routing option listed under proposed Article 19, Rule 4 (i.e., Route QCT Cross). 29 See Notice, supra note 3 at 12215. 30 See id. 31 See id. at 12215–16. 32 To clarify this distinction, the Exchange has proposed to amend the title to Article 19, Rule 3 from ‘‘Routing Events’’ to ‘‘Mandatory Routing VerDate Sep<11>2014 17:55 Jun 18, 2018 Jkt 244001 In addition, the Exchange proposes non-substantive amendments to Article 19, Rules 3(a)(1)–(5) to clarify the current operation of the Routing Events.33 II. Proceedings To Determine Whether To Approve or Disapprove SR–CHX– 2018–001 and Grounds for Disapproval Under Consideration The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Exchange Act 34 to determine whether the proposed rule change should be approved or disapproved. Institution of such proceedings is appropriate at this time in view of the legal and policy issues raised by the proposed rule change. Institution of proceedings does not indicate that the Commission has reached any conclusions with respect to any of the issues involved. Rather, as described below, the Commission seeks and encourages interested persons to provide comments on the proposed rule change. Pursuant to Section 19(b)(2)(B) of the Exchange Act,35 the Commission is providing notice of the grounds for disapproval under consideration. As discussed above, the Exchange has proposed to offer a new Route QCT Cross routing option, which would be available only to IBs. Route QCT Crosses would not check the CHX order book. In addition, Route QCT Crosses would only route to a single designated broker, as designated by each IB, for execution. The Commission is instituting proceedings to allow for additional analysis of the proposed rule change’s consistency with Sections 6(b)(5) 36 and 6(b)(8) 37 of the Exchange Act. Section 6(b)(5) of the Exchange Act requires that the rules of a national securities exchange be designed, among other things, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest, and not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. Section 6(b)(8) of the Exchange Act requires that the rules of a national securities exchange not impose any Events.’’ Also, the Exchange has proposed to eliminate the word ‘‘incoming’’ from proposed Rule 1(oo)(1), which it states is redundant in light of the proposed clarifying amendments to Article 19, Rule 3. 33 See Notice, supra note 3. 34 15 U.S.C. 78s(b)(2)(B). 35 Id. 36 15 U.S.C. 78f(b)(5). 37 15 U.S.C. 78f(b)(8). PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 burden on competition that is not necessary or appropriate in furtherance of the purposes of the Exchange Act. III. Procedure: Request for Written Comments The Commission requests that interested persons provide written submissions of their views, data, and arguments with respect to the issues identified above, as well as any other concerns they may have with the proposal. In particular, the Commission invites the written views of interested persons concerning whether the proposal is consistent with Sections 6(b)(5) and 6(b)(8), or any other provision of the Exchange Act, or the rules and regulations thereunder. Although there do not appear to be any issues relevant to approval or disapproval that would be facilitated by an oral presentation of views, data, and arguments, the Commission will consider, pursuant to Rule 19b–4, any request for an opportunity to make an oral presentation.38 Interested persons are invited to submit written data, views, and arguments regarding whether the proposal should be approved or disapproved by July 10, 2018. Any person who wishes to file a rebuttal to any other person’s submission must file that rebuttal by July 24, 2018. 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– CHX–2018–001 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 Numbers SR–CHX–2018–001. 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 38 Section 19(b)(2) of the Exchange Act, as amended by the Securities Act Amendments of 1975, Public Law 94–29 (June 4, 1975), grants the Commission flexibility to determine what type of proceeding—either oral or notice and opportunity for written comments—is appropriate for consideration of a particular proposal by a selfregulatory organization. See Securities Act Amendments of 1975, Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975). E:\FR\FM\19JNN1.SGM 19JNN1 Federal Register / Vol. 83, No. 118 / Tuesday, June 19, 2018 / Notices 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 these filings 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–CHX–2018–001 and should be submitted on or before July 10, 2018. Rebuttal comments should be submitted by July 24, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.39 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–13084 Filed 6–18–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–83424; File No. SR–NYSE– 2018–27] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Price List daltland on DSKBBV9HB2PROD with NOTICES June 13, 2018. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on June 1, 2018, New York Stock Exchange LLC (‘‘NYSE’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in 39 17 CFR 200.30–3(a)(57). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 VerDate Sep<11>2014 17:55 Jun 18, 2018 Jkt 244001 Items I, II, and III below, which Items have been prepared by the selfregulatory organization. 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 proposes to amend its Price List to (1) add a new incentive for member organizations and Supplemental Liquidity Providers (‘‘SLP’’) in Tape A securities when adding liquidity in securities traded pursuant to Unlisted Trading Privileges (‘‘UTP’’) (Tapes B and C) on the Pillar Trading Platform; (2) add a new Tier 4 for SLPs; and (3) make non-substantive changes to eliminate obsolete footnotes. The Exchange proposes to implement these changes to its Price List effective June 1, 2018. The proposed rule change is available on the Exchange’s website at www.nyse.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 self-regulatory organization 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 those 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its Price List to (1) add a new incentive for member organizations and SLPs on Tape A when adding liquidity in UTP Securities (Tapes B and C) on the Pillar Trading Platform; (2) add a new Tier 4 for SLPs; and (3) make non-substantive changes to eliminate obsolete footnotes. The Exchange proposes to implement these changes to its Price List effective June 1, 2018. New Cross Tape Incentive The Exchange proposes an additional incentive to member organizations and SLPs in Tape A securities that add liquidity to the Exchange in UTP Securities, as follows. PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 28479 As proposed, member organizations that meet the current requirements for the Non-Tier Adding Credit, Tier 3 Adding Credit, and Tier 4 Adding Credit on Tape A would be eligible to receive an additional $0.0001 per share if the member organization adds liquidity, excluding liquidity added as an SLP, in UTP Securities of at least 0.20% of Tape B and Tape C consolidated average daily volume (‘‘CADV’’) combined. Similarly, SLPs that (1) meet the current requirements for SLP Tier 3, SLP Tier 2 and SLP Tier 1A credits, and (2) add liquidity in UTP Securities of at least 0.30% of Tape B and Tape C CADV combined, would be eligible for an additional $0.0001 per share in securities with a per share price of $1.00 or more that meet the 10% average or more quoting requirement in an assigned security pursuant to Rule 107B (quotes of an SLP-Prop and an SLMM of the same member organization would not be aggregated). New SLP Tier 4 The Exchange proposes a new, fifth SLP Tier designated ‘‘4’’ that would provide that an SLP that either (1) is in the first two calendar months as an SLP, or (2) adds liquidity for all assigned SLP securities in the aggregate (including shares of both an SLP-Prop and an SLMM 4 of the same or an affiliated member organization) of an ADV of more than 0.03% of NYSE CADV after averaging less an adding ADV 5 of than 0.01% in each of the prior 3 months, after a discount of the percentage for the prior quarter of NYSE CADV in DMM assigned securities as of the last business day of the prior month, would receive a credit of $0.0029, or $0.00105 if a Non-Displayed Reserve Order, if the SLP meets the 10% average or more quoting requirement in an assigned security pursuant to Rule 107B when adding liquidity to the NYSE with orders, other than Mid-Point Liquidity (‘‘MPL’’) orders, in securities with a per share price of $1.00 or more. For 4 Under Rule 107B, an SLP can be either a proprietary trading unit of a member organization (‘‘SLP-Prop’’) or a registered market maker at the Exchange (‘‘SLMM’’). For purposes of the 10% average or more quoting requirement in assigned securities pursuant to Rule 107B, quotes of an SLPProp and an SLMM of the same member organization are not aggregated. However, for purposes of adding liquidity for assigned SLP securities in the aggregate, shares of both an SLPProp and an SLMM of the same member organization are included. 5 The phrase ‘‘Adding ADV’’ in the proposed tier would have a citation to footnote 4 in the current Price List, which provides ‘‘For purposes of transaction fees and Supplemental Liquidity Provider liquidity credits, ADV calculations exclude early closing days.’’ The text of current footnote 4 would remain unchanged. E:\FR\FM\19JNN1.SGM 19JNN1

Agencies

[Federal Register Volume 83, Number 118 (Tuesday, June 19, 2018)]
[Notices]
[Pages 28477-28479]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-13084]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83425; File No. SR-CHX-2018-001]


Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Order Instituting Proceedings To Determine Whether To Approve or 
Disapprove a Proposed Rule Change To Adopt the Route QCT Cross Routing 
Option

June 13, 2018.

I. Introduction

    On March 6, 2018, the Chicago Stock Exchange, Inc. (``CHX'' or 
``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 adopt the Route QCT Cross 
routing option. The proposed rule change was published for comment in 
the Federal Register on March 20, 2018.\3\ On May 1, 2018, 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 received no comment letters on the proposed rule change. 
This order institutes proceedings under Section 19(b)(2)(B) of the 
Exchange Act \6\ to determine whether to approve or disapprove the 
proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 82870 (March 14, 
2018), 83 FR 12214 (``Notice'').
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 83143, 83 FR 20123 
(May 7, 2018). The Commission designated June 18, 2018, as the date 
by which the Commission shall approve or disapprove, or institute 
proceedings to determine whether to disapprove, the proposed rule 
change.
    \6\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposed Rule Change

    Currently, under the Exchange's rules, Routable Orders \7\ 
submitted to the CHX matching system (``Matching System'') \8\ for 
execution are routed away from the Matching System automatically if a 
Routing Event \9\ is triggered. The Exchange's current rules provide 
that all Routable Orders \10\ are limit orders. Market \11\ and cross 
orders \12\ are never routable. The Exchange does not currently permit 
orders to be directly routed to an away Trading Center \13\ without 
first being submitted to the Matching System.
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    \7\ See CHX Article 1, Rule 1(oo).
    \8\ The Matching System is part of the Exchange's ``Trading 
Facilities,'' as defined under CHX Article 1, Rule 1(z).
    \9\ See CHX Article 19, Rule 3(a)(1)-(5).
    \10\ See CHX Article 1, Rule 1(oo) defining ``Routable Order.''
    \11\ See CHX Article 1, Rule 2(a)(3) defining ``market order.''
    \12\ See CHX Article 1, Rule 2(a)(2) defining ``cross order.''
    \13\ See CHX Article 1, Rule 1(nn) defining ``Trading Center.''
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    Because Qualifed Contingent Trade (``QCT'') Crosses \14\ are exempt 
from the trade-through prohibition of Rule 611 of Regulation NMS,\15\ 
the Matching System permits QCT Crosses to trade-through protected 
quotes of away markets. Under the Exchange's current rules, QCT Crosses 
are handled IOC \16\ and can never rest on the CHX book. Moreover, a 
QCT Cross submitted to the Matching System will be cancelled back to 
the order sender as ``blocked'' if a precedent limit order priced at or 
better than the QCT Cross is resting on the CHX book,\17\ except that a 
QCT Cross priced at the top of the CHX book (i.e., the best-ranked 
order on the CHX book pursuant to Article 20, Rule 8(b)) that qualifies 
for Cross With Size \18\ handling will be permitted to execute.
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    \14\ QCT Crosses are cross orders that are component orders to 
Qualified Contingent Trades that are submitted by an Institutional 
Broker. See CHX Article 1, Rule 2(b)(2)(E) defining ``Qualified 
Contingent Trade.'' See also CHX Article 1, Rule 2(a)(2) defining 
``cross order.''
    \15\ See Securities Exchange Act Release No. 57620 (April 4, 
2008), 73 FR 19271 (April 4, 2008).
    \16\ See CHX Article 1, Rule 2(a)(2)
    \17\ See CHX Article 1, Rule 2(a)(2). See also CHX Article 20, 
Rule 8(e)(1).
    \18\ See CHX Article 1, Rule 2(g)(1).
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    The Exchange has proposed to adopt the Route QCT Cross routing 
option, which will permit only Institutional Brokers (``IBs'') \19\ to 
directly route a QCT Cross to a non-affiliated third-party broker-
dealer designated by the IB (``designated executing broker'') for 
execution. Route QCT Cross orders will be handled like current Routable 
Orders,\20\ except that the Route QCT Cross order will never be 
submitted to the Matching System for execution. Specifically, upon 
receipt of a Route QCT Cross order, the Exchange will cause the order 
to be routed IOC \21\ from the Exchange, through CHXBD, LLC 
(``CHXBD''), the Exchange's affiliated routing broker, to the 
designated executing broker identified by the IB.\22\ The Exchange 
states that the relationship between a designated executing broker and 
CHXBD will be governed by applicable CHX Rules \23\ and customary 
interbroker agreements, such as fully-disclosed clearing and customer 
agreements. The Exchange represents that at all times, the use of Route 
QCT Cross will be optional.\24\ The Exchange also states that Route QCT 
Cross is similar to the routing options available on the Nasdaq Stock 
Market \25\ and Cboe BYX and Cboe BZX exchanges.\26\
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    \19\ The Exchange states that it has proposed to limit use of 
Route QCT Cross to IBs to be consistent with the fact that only IBs 
are currently permitted to submit QCT Crosses to the Matching 
System. See CHX Article 1, Rule 2(b)(2)(E).
    \20\ See CHX Article 1, Rule 1(oo).
    \21\ See CHX Article 1, Rule 2(a)(2).
    \22\ The Exchange states that IBs will be permitted to identify 
only one designated executing broker to which all Route QCT Cross 
orders submitted by the IB will be routed, subject to additional 
requirements, as described below.
    \23\ See e.g., CHX Article 19, Rule 2(a).
    \24\ See Notice, supra note 3 at 12215.
    \25\ See id. The Exchange states that like Route QCT Cross, the 
``Directed Order'' routing option offered by the Nasdaq Stock Market 
(``Nasdaq'') permits an order sender to route an order to another 
market center while bypassing the Nasdaq's order book, which may 
result in the routed order executing at a price through Nasdaq's top 
of book. See id.
    \26\ The Exchange states that like Route QCT Cross, the ``DRT'' 
routing option offered by the Cboe BYX and Cboe BZX exchanges 
permits an order to be routed to one or more away alternative 
trading systems. See id.
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    Specifically, the Exchange has proposed to adopt proposed Article 
19, Rule 4 (Routing Options) to provide that routing options may be 
combined with all available order types, modifiers and related terms, 
except for order types, modifiers, and related terms that are 
inconsistent with the terms of a routing option, and that the Exchange 
may activate or deactivate any routing option at its discretion and, if 
practicable, after notice to Participants.\27\ Article 19, Rule 4(a)(1) 
provides that Route QCT Cross is

[[Page 28478]]

a routing option,\28\ which may only be utilized by IBs, that instructs 
the Exchange to route a cross order marked QCT directly to a non-
affiliated third-party broker-dealer designated by the IB without 
submitting the order into the Matching System for execution. In 
addition, each IB is permitted to identify only one designated 
executing broker to which all Route QCT Cross orders submitted by the 
IB would be routed. Furthermore, the Exchange represents that prior to 
the Exchange accepting any Route QCT Cross orders directed to a 
specific designated executing broker, the Exchange would confirm that 
the designated executing broker has established connectivity to the 
Exchange's routing systems.\29\ In addition, the IB would be 
responsible for all away execution fees resulting from the execution of 
Route QCT Cross orders, including any guaranteed payments to its 
designated executing broker.\30\ Moreover, Route QCT Cross orders would 
be routed IOC and a Route QCT Cross order that could not be executed by 
a designated executing broker, for any reason, would be cancelled back 
to the original order sender.\31\
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    \27\ See CHX Article 1, Rule 1(s).
    \28\ In addition, since the cross orders are not currently 
Routable Orders, the Exchange has proposed to amend Article 1, Rule 
1(oo) by adopting paragraph (oo)(2), which would expand the 
definition of Routable Orders to include any order marked by a 
routing option listed under proposed Article 19, Rule 4 (i.e., Route 
QCT Cross).
    \29\ See Notice, supra note 3 at 12215.
    \30\ See id.
    \31\ See id. at 12215-16.
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    As Route QCT Cross orders would be routed away from the Exchange 
without being submitted to the Matching System for execution, the 
Exchange proposes to amend Article 19, Rules 1(a) and (c), and Rule 
2(a) to replace the term ``Matching System'' with ``Exchange.'' 
Moreover, since Route QCT Cross orders are a subset of cross orders 
that will not be handled IOC upon receipt by the Exchange, and all 
cross orders currently received by the Exchange are deemed to have been 
received IOC, the Exchange proposes to amend the definition of ``cross 
orders'' under Article 1, Rule 2(a)(2) to provide that all cross orders 
submitted to the Matching System for execution shall be deemed to have 
been received IOC.
    The Exchange has also proposed to amend Article 19, Rule 3(a) to 
provide that a Routable Order that is submitted to the Matching System 
would be routed away from the Matching System pursuant to the CHX 
Routing Services if a Routing Event is triggered.\32\
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    \32\ To clarify this distinction, the Exchange has proposed to 
amend the title to Article 19, Rule 3 from ``Routing Events'' to 
``Mandatory Routing Events.'' Also, the Exchange has proposed to 
eliminate the word ``incoming'' from proposed Rule 1(oo)(1), which 
it states is redundant in light of the proposed clarifying 
amendments to Article 19, Rule 3.
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    In addition, the Exchange proposes non-substantive amendments to 
Article 19, Rules 3(a)(1)-(5) to clarify the current operation of the 
Routing Events.\33\
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    \33\ See Notice, supra note 3.
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II. Proceedings To Determine Whether To Approve or Disapprove SR-CHX-
2018-001 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Exchange Act \34\ to determine whether the proposed 
rule change should be approved or disapproved. Institution of such 
proceedings is appropriate at this time in view of the legal and policy 
issues raised by the proposed rule change. Institution of proceedings 
does not indicate that the Commission has reached any conclusions with 
respect to any of the issues involved. Rather, as described below, the 
Commission seeks and encourages interested persons to provide comments 
on the proposed rule change.
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    \34\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Exchange Act,\35\ the 
Commission is providing notice of the grounds for disapproval under 
consideration. As discussed above, the Exchange has proposed to offer a 
new Route QCT Cross routing option, which would be available only to 
IBs. Route QCT Crosses would not check the CHX order book. In addition, 
Route QCT Crosses would only route to a single designated broker, as 
designated by each IB, for execution.
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    \35\ Id.
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    The Commission is instituting proceedings to allow for additional 
analysis of the proposed rule change's consistency with Sections 
6(b)(5) \36\ and 6(b)(8) \37\ of the Exchange Act. Section 6(b)(5) of 
the Exchange Act requires that the rules of a national securities 
exchange be designed, among other things, to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system and, in general, 
to protect investors and the public interest, and not be designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers. Section 6(b)(8) of the Exchange Act requires that the rules of 
a national securities exchange not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Exchange Act.
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    \36\ 15 U.S.C. 78f(b)(5).
    \37\ 15 U.S.C. 78f(b)(8).
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III. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and arguments with respect to the 
issues identified above, as well as any other concerns they may have 
with the proposal. In particular, the Commission invites the written 
views of interested persons concerning whether the proposal is 
consistent with Sections 6(b)(5) and 6(b)(8), or any other provision of 
the Exchange Act, or the rules and regulations thereunder. Although 
there do not appear to be any issues relevant to approval or 
disapproval that would be facilitated by an oral presentation of views, 
data, and arguments, the Commission will consider, pursuant to Rule 
19b-4, any request for an opportunity to make an oral presentation.\38\
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    \38\ Section 19(b)(2) of the Exchange Act, as amended by the 
Securities Act Amendments of 1975, Public Law 94-29 (June 4, 1975), 
grants the Commission flexibility to determine what type of 
proceeding--either oral or notice and opportunity for written 
comments--is appropriate for consideration of a particular proposal 
by a self-regulatory organization. See Securities Act Amendments of 
1975, Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 
75, 94th Cong., 1st Sess. 30 (1975).
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    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposal should be approved or 
disapproved by July 10, 2018. Any person who wishes to file a rebuttal 
to any other person's submission must file that rebuttal by July 24, 
2018.
    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-CHX-2018-001 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 Numbers SR-CHX-2018-001. 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

[[Page 28479]]

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 these filings 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-CHX-2018-001 and should be submitted on 
or before July 10, 2018. Rebuttal comments should be submitted by July 
24, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\39\
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    \39\ 17 CFR 200.30-3(a)(57).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-13084 Filed 6-18-18; 8:45 am]
BILLING CODE 8011-01-P
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