Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Rule 11.9, Orders and Modifiers, 31229-31232 [2018-14296]

Download as PDF Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Notices the date of the filing.12 However, pursuant to Rule 19b–4(f)(6)(iii),13 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because doing so will allow the Pilot Program to continue without interruption in a manner that is consistent with the Commission’s prior approval of the extension and expansion of the Pilot Program and will allow the Exchange and the Commission additional time to analyze the impact of the Pilot Program.14 Accordingly, the Commission designates the proposed rule change as operative upon filing with the Commission.15 At any time within 60 days of the filing of such 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 under Section 19(b)(2)(B) 16 of the Act to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments sradovich on DSK3GMQ082PROD with NOTICES 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: 12 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) requires the Exchange to give the Commission written notice of the Exchange’s intent to file the proposed rule change along with a brief description and the text of 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 pre-filing requirement. 13 17 CFR 240.19b–4(f)(6)(iii). 14 See Securities Exchange Act Release No. 61061 (November 24, 2009), 74 FR 62857 (December 1, 2009) (SR–NYSEArca–2009–44). 15 For purposes only of waiving the operative delay for this proposal, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 16 15 U.S.C. 78s(b)(2)(B). VerDate Sep<11>2014 17:07 Jul 02, 2018 Jkt 244001 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– Phlx–2018–50 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–Phlx–2018–50. 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–Phlx–2018–50 and should be submitted on or before July 24, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–14291 Filed 7–2–18; 8:45 am] BILLING CODE 8011–01–P PO 00000 17 17 CFR 200.30–3(a)(12). Frm 00113 Fmt 4703 Sfmt 4703 31229 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–83536; File No. SR– CboeBYX–2018–009] Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Rule 11.9, Orders and Modifiers June 28, 2018. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on June 18, 2018, Cboe BYX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BYX’’) 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 ‘‘noncontroversial’’ 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 add a new optional order type modifier to be known as Non-Displayed Swap. The proposed amendments are substantively identical to the rules of Cboe EDGX Exchange, Inc. (‘‘EDGX’’) 5 and substantially similar to the rules of the Nasdaq Stock Market LLC (‘‘Nasdaq’’) 6 and NYSE Arca, Inc. (‘‘Arca’’).7 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 EDGX Rules 11.6(n)(7), 11.8(b)(7) and 11.8(d)(5); see also Securities Exchange Act Release No. 80841 (June 1, 2017), 82 FR 26559 (June 7, 2017), (Notice of Filing and Immediate Effectiveness To Add a New Optional Order Instruction Known as Non-Displayed Swap). 6 See Nasdaq Rule 4703(m) (defining the Trade Now order modifier); see also Securities Exchange Act Release No. 79282 (November 10, 2016), 81 FR 81219 (November 17, 2016) (Notice of Filing and Immediate Effectiveness of Proposed Rule change to Amend Rule 4702 and Rule 4703 to Add a ‘‘Trade Now’’ Instruction to Certain Order Types). 7 See Arca Rule 7.31–E(d)(2)(B) (describing the Non-Display Remove Modifier); see also Securities Exchange Act Release No. 76267 (October 26, 2015), 80 FR 66951 (October 30, 2015) (Order Approving Proposed Rule change Adopting New Equity Trading Rules Relating to Orders and Modifiers and Retail Liquidity Program To Reflect the Implementation of Pillar, the Exchange’s New Trading Technology Platform). 2 17 E:\FR\FM\03JYN1.SGM 03JYN1 31230 Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Notices 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 sradovich on DSK3GMQ082PROD with NOTICES 1. Purpose The Exchange proposes to add a new optional order type modifier to be known as Non-Displayed Swap. The proposed amendments are substantively identical to the rules of EDGX 8 and substantially similar to the rules of Nasdaq and Arca.9 The proposed Non-Displayed Swap (‘‘NDS’’) instruction would provide resting limit orders that are not displayed on the Exchange 10 and MidPoint Peg Orders resting on the BYX Book 11 with a greater ability to receive an execution when that resting order is locked by an incoming order (e.g., the price of the resting non-displayed order is equal to the price of the incoming order that is to be placed on the BYX Book). The NDS instruction would be an optional order instruction that would allow Users 12 to have their resting nondisplayed orders execute against an incoming order with a Post Only instruction rather than have it be locked by the incoming order. NDS would be defined as an instruction on an order resting on the BYX Book that, when locked by an incoming order with a Post Only instruction that does not remove liquidity pursuant to paragraph (c)(6) of Exchange Rule 11.9,13 causes such order 8 See supra note 5. supra notes 6 and 7. 10 See Exchange Rule 11.9(c)(11). 11 See Exchange Rule 1.5(e). 12 See Exchange Rule 1.5(cc). 13 Under Exchange Rule 11.9(c)(6), a BYX Post Only Order will remove contra-side liquidity from the BYX Book if the order is an order to buy or sell a security priced below $1.00 or if the value of such execution when removing liquidity equals or 9 See VerDate Sep<11>2014 17:07 Jul 02, 2018 Jkt 244001 to be converted to an executable order that removes liquidity against such incoming order. An NDS instruction would only be eligible for inclusion on a non-displayed limit order or a MidPoint Peg Order. An order with a NDS instruction would not be eligible for routing pursuant to Exchange Rule 11.13, Order Execution and Routing. The proposed NDS instruction assists in the avoidance of an internally locked BYX Book (though such lock would not be displayed by the Exchange) 14 by facilitating the execution of orders that would otherwise lock each other. The following example illustrates the operation of an order with a NDS instruction. Assume the National Best Bid and Offer is $10.00 by $10.04. There is a non-displayed limit order to buy resting on the BYX Book at $10.03. A BYX Post Only Order to sell priced at $10.03 is entered. Under current behavior, the incoming sell order marked as Post Only would post to the BYX Book because it would not receive sufficient price improvement.15 This would result in the BYX Book being internally locked.16 As proposed, if the non-displayed limit order to buy also included a NDS instruction, the orders would instead execute against each other at $10.03, with the resting buy order with the NDS instruction becoming the remover of liquidity and the incoming BYX Post Only Order to sell becoming the liquidity provider. Assume the same facts as above, but that a non-displayed limit order to buy at $10.03 (‘‘Order A’’) is also resting on the BYX Book with time priority ahead of the non-displayed limit order mentioned above (‘‘Order B’’). Like above, a BYX Post Only Order to sell priced at $10.03 is entered. Under current behavior, the incoming BYX Post Only Order to sell would post to the BYX Book because the value of such execution against the resting buy interest when removing liquidity does exceeds the value of such execution if the order instead posted to the BYX Book and subsequently provided liquidity, including the applicable fees charged or rebates provided. To determine at the time of a potential execution whether the value of such execution when removing liquidity equals or exceeds the value of such execution if the order instead posted to the BYX Book and subsequently provided liquidity, the Exchange will use the highest possible rebate paid and highest possible fee charged for such executions on the Exchange. 14 See Exchange Rule 11.13(a)(4)(C). 15 Id. [sic] 16 In the event the incoming order with a Post Only instruction was to be displayed, it would post and display at $10.03 and the resting buy order with a Non-Displayed instruction would not execute against it or subsequent incoming sell orders at $10.03 for so long as the sell order was displayed on the Exchange. See Exchange Rule 11.13(a)(4)(C) and (D). PO 00000 Frm 00114 Fmt 4703 Sfmt 4703 not equal or exceed the value of such execution if the order instead posted to the BYX Book and subsequently provided liquidity, including the applicable fees charged or rebates provided. As proposed, if Order B also included a NDS instruction, the incoming sell order would execute against Order B and such order would become the remover of liquidity and the BYX Post Only Order to sell would become the liquidity provider. In such case, Order A cedes time priority to Order B because Order A did not also include a NDS instruction and thus the User that submitted Order A did not indicate the preference to be treated as the remover of liquidity in favor of an execution; instead, by not using NDS, a User indicates the preference to remain posted on the BYX Book as a liquidity provider.17 However, if the incoming sell order was priced at $10.02, it would receive sufficient price improvement to execute upon entry against all resting buy limit orders in time priority at $10.03.18 If the order with a NDS instruction is only partially executed, the unexecuted portion of that order remains on the BYX Book and maintains its priority, as is the case today for an order that is partially executed and not cancelled by the User.19 The Exchange is proposing to make the NDS instruction available to limit orders 20 that are not displayed on the Exchange 21 and MidPoint Peg Orders.22 Because the NDS instruction would be only available to limit orders not displayed on the Exchange and to MidPoint Peg Orders, the NDS instruction would not be available to other order types provided by the Exchange under its Rule 11.9, such as BYX Market Orders, Reserve Orders, and Market Maker Peg Orders,23 as the NDS instruction would be inconsistent with the use of those order types. The NDS instruction could, however, be 17 Should the limit order to buy at $10.03 with time priority (i.e., Order A) be displayed on the BYX Book, the incoming BYX Post Only Order to sell at $10.03 will not execute against the nondisplayed buy order with a NDS instruction because displayed orders have priority over non-displayed orders. In such a case, the incoming limit order would be handled as it is today in accordance with existing Exchange rules. See, e.g., Exchange Rules 11.9 and 11.13(a). 18 The execution occurs here because the value of the execution against the buy order when removing liquidity exceeds the value of such execution if the order instead posted to the BYX Book and subsequently provided liquidity, including the applicable fees charged or rebates provided. See supra note 13. 19 See Exchange Rule 11.12(a)(5). 20 See Exchange Rule 11.9(a)(1). 21 See Exchange Rule 11.9(c)(11). 22 See Exchange Rule 11.9(c)(9). 23 See Exchange Rules 11.9(a)(2), 11.9(c)(1) and 11.9(c)(16), respectively. E:\FR\FM\03JYN1.SGM 03JYN1 Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Notices sradovich on DSK3GMQ082PROD with NOTICES combined with other instructions also available to non-displayed limit orders, such as the Minimum Quantity Order instruction, the Primary Pegged Order instruction, the Market Pegged Order instruction or the Discretionary Order instruction.24 The Exchange notes that similar functionality exists on Nasdaq and Arca. Nasdaq refers to their functionality as the ‘‘Trade Now’’ instruction 25 and Arca refers to their functionality as the ‘‘Non-Display Remove Modifier’’.26 On Arca, a Limit Non-Displayed Order may be designated with a Non-Display Remove Modifier. If so designated, a Limit Non-Displayed Order to buy (sell) will trade as the remover of liquidity with an incoming Adding Liquidity Only Order (‘‘ALO Order’’) to sell (buy) that has a working price equal to the working price of the Limit NonDisplayed Order.27 On Nasdaq, Trade Now is an order attribute that allows a resting order that becomes locked by an incoming Displayed Order to execute against the available size of the contraside locking order as a liquidity taker, and any remaining shares of the resting order will remain posted on the Nasdaq Book with the same priority.28 Nasdaq requires the contra-side order to be display eligible, while the Exchange proposes to enable an order with a NDS instruction to remove liquidity regardless of whether the incoming order would have ultimately been 24 See Exchange Rules 11.9(c)(5), 11.9(c)(8)(A), 11.9(c)(8)(B) and 11.9(c)(10), respectively. 25 See Nasdaq Rule 4703(m). See also Securities and Exchange Act Release No. 79282 (November 10, 2016), 81 FR 81219 (November 17, 2016) (SR– Nasdaq–2016–156) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amend Rule 4703 and Rule 4703 to add a ‘‘Trade Now’’ Instruction to Certain Order Types). 26 See Arca Rule 7.31–E(d)(2)(B). See also Securities and Exchange Act Release No. 76267 (October 26, 2015), 80 FR 66951 (October 30, 2015) (SR–NYSEArca–2015–56) (Order Approving Proposed Rule Change, and Notice of Filing and Order Granting Accelerated Approval of Amendment Nos. 1 and 2 Thereto, Adopting New Equity Trading Rules Relating to Orders and Modifiers and the Retail Liquidity Program To Reflect the Implementation of Pillar, the Exchange’s New Trading Technology Platform) (including the Non-Display Remove Modifier). 27 See Arca Rule 7.31–E(d)(2)(b). 28 Arca provides their Non-Display Remove Modifier to their Mid-Point Liquidity Orders (‘‘MPL Orders’’) designated Day and MPL–ALO Orders and Arca Only Orders. Nasdaq’s Trade Now functionality is available to Price to Comply Orders, Price to Display Orders, Non-Displayed Orders, Post-Only Orders, Midpoint Peg Post-Only Orders, and Market Maker Peg Orders. To the extent the NDS instruction is only available to non-displayed limit orders and MidPoint Peg Orders, the Exchange notes that the NDS instruction will apply to different order types than Arca’s Non-Display Remove Modifier and Nasdaq’s Trade Now functionality. VerDate Sep<11>2014 17:07 Jul 02, 2018 Jkt 244001 eligible for display consistent with Arca’s Non-Display Remove Modifier. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act 29 in general, and furthers the objectives of Section 6(b)(5) of the Act 30 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 by offering Users optional functionality that will facilitate the execution of orders that would otherwise remain unexecuted, thereby increasing the efficient functioning of the Exchange. The NDS instruction is an optional feature that is intended to reflect the order management practices of various market participants. The proposed NDS instruction assists in the avoidance of an internally locked BYX Book by facilitating the execution of orders that would otherwise post, or remain posted, to the BYX Book. 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. On the contrary, the Exchange believes the proposed rule change promotes competition because it will enable the Exchange to offer functionality substantially similar to that offered by Nasdaq and Arca (in addition to the fact that such functionality is identical to that already offered by the Exchange’s affiliate, EDGX).31 Therefore, the Exchange does not believe the proposed rule change will result in any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. As the NDS feature will be equally available to all Users, the Exchange does not believe the proposed rule change will result in any burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. PO 00000 29 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 31 See supra notes 5–7. 30 15 Frm 00115 Fmt 4703 Sfmt 4703 31231 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)(iii) of the Act 32 and subparagraph (f)(6) of Rule 19b–4 thereunder.33 A proposed rule change filed under Rule 19b–4(f)(6) normally does not become operative for 30 days after the date of the filing. However, Rule 19b– 4(f)(6)(iii) 34 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. In its filing, BYX requested that the Commission waive the 30-day operative delay so that the Exchange can implement the proposed rule change promptly after filing. The Exchange noted that the proposed functionality is optional, may lead to increased order interaction on the Exchange, and is identical to functionality already provided on EDGX. The Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest, as such waiver will permit the Exchange to update its rule without delay so that it provides the same optional NDS functionality as is available on EDGX and potentially increase order interaction on the Exchange. Accordingly, the Commission waives the 30-day operative delay and designates the proposed rule change operative upon filing.35 At any time within 60 days of the filing of the proposed rule change, the 32 15 U.S.C. 78s(b)(3)(A)(iii). 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. 34 17 CFR 240.19b–4(f)(6)(iii). 35 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). 33 17 E:\FR\FM\03JYN1.SGM 03JYN1 31232 Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Notices Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) 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. submit only information that you wish to make available publicly. All submissions should refer to File Number SR–CboeBYX–2018–009, and should be submitted on or before July 24, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.36 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–14296 Filed 7–2–18; 8:45 am] 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–2018–009 on the subject line. sradovich on DSK3GMQ082PROD with NOTICES 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: Self-Regulatory Organizations; Nasdaq BX; Order Granting an Extension to Limited Exemptions From Rule 612(c) of Regulation NMS in Connection With the Exchange’s Retail Price Improvement Program Until December 31, 2018 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–2018–009. 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 June 28, 2018. VerDate Sep<11>2014 17:07 Jul 02, 2018 Jkt 244001 BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–83542; File No. SR–BX– 2014–048] On November 28, 2014 the Securities and Exchange Commission (‘‘Commission’’) issued an order pursuant to its authority under Rule 612(c) of Regulation NMS (‘‘Sub-Penny Rule’’) 1 that granted Nasdaq BX, Inc. (‘‘BX’’ or ‘‘Exchange’’) a limited exemption from the Sub-Penny Rule in connection with the operation of the Exchange’s Retail Price Improvement Program (the ‘‘RPI Program’’).2 The limited exemption was granted concurrently with the Commission’s approval of the Exchange’s proposal to adopt its RPI Program for a one-year pilot term.3 On November 20, 2015, the Commission extended the temporary exemption until December 2016 concurrently with an immediately effective filing that extended the operation of the RPI Program until December 1, 2016.4 On December 1, 2016, the Commission extended the temporary exemption until December 1, 2017 concurrently with an immediately effective filing that extended the operation of the RPI Program until December 1, 2017.5 On December 1, CFR 200.30–3(a)(12) and (59). 1 17 CFR 242.612(c). 2 See Securities Exchange Act Release No. 73702, 79 FR 72049 (December 4, 2014) (SRBX–2014–048) (‘‘RPI Approval Order’’). 3 See id. 4 See Securities Exchange Act Release No. 76490 (November 20, 2015), 80 FR 74165 (November 27, 2015) (SR–BX–2015–073). 5 See Securities Exchange Act Release No. 79446 (December 1, 2016), 81 FR 88290 (December 7, 2016) (SR–BX–2016–065). PO 00000 36 17 Frm 00116 Fmt 4703 Sfmt 4703 2017, the Commission again extended the temporary exemption until June 30, 2018 concurrently with an immediately effective filing that extended the operation of the RPI Program until December 1, 2017.6 The Exchange now seeks to extend the exemption until December 31, 2018.7 The Exchange’s request was made in conjunction with an immediately effective filing that extends the operation of the RPI Program through the same date.8 In its request to extend the exemption, the Exchange notes that given the gradual implementation of the RPI Program and the preliminary participation and results, extending the exemption would provide additional opportunities for greater participation and assessment of the results.9 Accordingly, the Exchange has asked additional time to allow it and the Commission to analyze data concerning the RPI Program, which the Exchange committed to provide to the Commission.10 For this reason and the reasons stated in the RPI Approval Order originally granting the limited exemption, the Commission, pursuant to its authority under Rule 612(c) of Regulation NMS, finds that pursuant to its authority under Rule 612(c) of Regulation NMS, extending the exemption is appropriate in the public interest and consistent with the protection of investors. Therefore, it is hereby ordered that, pursuant to Rule 612(c) of Regulation NMS, the Exchange is granted a limited exemption from Rule 612 of Regulation NMS that allows the Exchange to accept and rank orders priced equal to or greater than $1.00 per share in increments of $0.001, in connection with the operation of its RPI Program, until December 31, 2018. The limited and temporary exemption extended by this Order is subject to modification or revocation if at any time the Commission determines that such action is necessary or appropriate in furtherance of the purposes of the Securities Exchange Act of 1934. Responsibility for compliance with any applicable provisions of the Federal securities laws must rest with the 6 See Securities Exchange Act Release No. 82192 (December 1, 2017), 82 FR 57809 (December 7, 2017) (SR–BX–2017–055). 7 See Letter from Jeffrey S. Davis, Vice President and Deputy General Counsel and Secretary, Nasdaq BX, Inc. to Eduardo A. Aleman, Assistant Secretary, Securities and Exchange Commission dated June 21, 2018 (‘‘BX Letter’’). 8 See SR–BX–2018–026. 9 See, e.g., BX Letter at 3; RPI Approval Order, supra note 2. 10 See, e.g., id.; RPI Approval Order, supra note 2. E:\FR\FM\03JYN1.SGM 03JYN1

Agencies

[Federal Register Volume 83, Number 128 (Tuesday, July 3, 2018)]
[Notices]
[Pages 31229-31232]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-14296]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83536; File No. SR-CboeBYX-2018-009]


Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to Rule 
11.9, Orders and Modifiers

June 28, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on June 18, 2018, Cboe BYX Exchange, Inc. (the ``Exchange'' or ``BYX'') 
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.
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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 add a new optional order type 
modifier to be known as Non-Displayed Swap. The proposed amendments are 
substantively identical to the rules of Cboe EDGX Exchange, Inc. 
(``EDGX'') \5\ and substantially similar to the rules of the Nasdaq 
Stock Market LLC (``Nasdaq'') \6\ and NYSE Arca, Inc. (``Arca'').\7\
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    \5\ See EDGX Rules 11.6(n)(7), 11.8(b)(7) and 11.8(d)(5); see 
also Securities Exchange Act Release No. 80841 (June 1, 2017), 82 FR 
26559 (June 7, 2017), (Notice of Filing and Immediate Effectiveness 
To Add a New Optional Order Instruction Known as Non-Displayed 
Swap).
    \6\ See Nasdaq Rule 4703(m) (defining the Trade Now order 
modifier); see also Securities Exchange Act Release No. 79282 
(November 10, 2016), 81 FR 81219 (November 17, 2016) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule change to Amend 
Rule 4702 and Rule 4703 to Add a ``Trade Now'' Instruction to 
Certain Order Types).
    \7\ See Arca Rule 7.31-E(d)(2)(B) (describing the Non-Display 
Remove Modifier); see also Securities Exchange Act Release No. 76267 
(October 26, 2015), 80 FR 66951 (October 30, 2015) (Order Approving 
Proposed Rule change Adopting New Equity Trading Rules Relating to 
Orders and Modifiers and Retail Liquidity Program To Reflect the 
Implementation of Pillar, the Exchange's New Trading Technology 
Platform).

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[[Page 31230]]

    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 add a new optional order type modifier to 
be known as Non-Displayed Swap. The proposed amendments are 
substantively identical to the rules of EDGX \8\ and substantially 
similar to the rules of Nasdaq and Arca.\9\
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    \8\ See supra note 5.
    \9\ See supra notes 6 and 7.
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    The proposed Non-Displayed Swap (``NDS'') instruction would provide 
resting limit orders that are not displayed on the Exchange \10\ and 
Mid-Point Peg Orders resting on the BYX Book \11\ with a greater 
ability to receive an execution when that resting order is locked by an 
incoming order (e.g., the price of the resting non-displayed order is 
equal to the price of the incoming order that is to be placed on the 
BYX Book). The NDS instruction would be an optional order instruction 
that would allow Users \12\ to have their resting non-displayed orders 
execute against an incoming order with a Post Only instruction rather 
than have it be locked by the incoming order. NDS would be defined as 
an instruction on an order resting on the BYX Book that, when locked by 
an incoming order with a Post Only instruction that does not remove 
liquidity pursuant to paragraph (c)(6) of Exchange Rule 11.9,\13\ 
causes such order to be converted to an executable order that removes 
liquidity against such incoming order. An NDS instruction would only be 
eligible for inclusion on a non-displayed limit order or a Mid-Point 
Peg Order. An order with a NDS instruction would not be eligible for 
routing pursuant to Exchange Rule 11.13, Order Execution and Routing. 
The proposed NDS instruction assists in the avoidance of an internally 
locked BYX Book (though such lock would not be displayed by the 
Exchange) \14\ by facilitating the execution of orders that would 
otherwise lock each other.
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    \10\ See Exchange Rule 11.9(c)(11).
    \11\ See Exchange Rule 1.5(e).
    \12\ See Exchange Rule 1.5(cc).
    \13\ Under Exchange Rule 11.9(c)(6), a BYX Post Only Order will 
remove contra-side liquidity from the BYX Book if the order is an 
order to buy or sell a security priced below $1.00 or if the value 
of such execution when removing liquidity equals or exceeds the 
value of such execution if the order instead posted to the BYX Book 
and subsequently provided liquidity, including the applicable fees 
charged or rebates provided. To determine at the time of a potential 
execution whether the value of such execution when removing 
liquidity equals or exceeds the value of such execution if the order 
instead posted to the BYX Book and subsequently provided liquidity, 
the Exchange will use the highest possible rebate paid and highest 
possible fee charged for such executions on the Exchange.
    \14\ See Exchange Rule 11.13(a)(4)(C).
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    The following example illustrates the operation of an order with a 
NDS instruction. Assume the National Best Bid and Offer is $10.00 by 
$10.04. There is a non-displayed limit order to buy resting on the BYX 
Book at $10.03. A BYX Post Only Order to sell priced at $10.03 is 
entered. Under current behavior, the incoming sell order marked as Post 
Only would post to the BYX Book because it would not receive sufficient 
price improvement.\15\ This would result in the BYX Book being 
internally locked.\16\ As proposed, if the non-displayed limit order to 
buy also included a NDS instruction, the orders would instead execute 
against each other at $10.03, with the resting buy order with the NDS 
instruction becoming the remover of liquidity and the incoming BYX Post 
Only Order to sell becoming the liquidity provider.
---------------------------------------------------------------------------

    \15\ Id. [sic]
    \16\ In the event the incoming order with a Post Only 
instruction was to be displayed, it would post and display at $10.03 
and the resting buy order with a Non-Displayed instruction would not 
execute against it or subsequent incoming sell orders at $10.03 for 
so long as the sell order was displayed on the Exchange. See 
Exchange Rule 11.13(a)(4)(C) and (D).
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    Assume the same facts as above, but that a non-displayed limit 
order to buy at $10.03 (``Order A'') is also resting on the BYX Book 
with time priority ahead of the non-displayed limit order mentioned 
above (``Order B''). Like above, a BYX Post Only Order to sell priced 
at $10.03 is entered. Under current behavior, the incoming BYX Post 
Only Order to sell would post to the BYX Book because the value of such 
execution against the resting buy interest when removing liquidity does 
not equal or exceed the value of such execution if the order instead 
posted to the BYX Book and subsequently provided liquidity, including 
the applicable fees charged or rebates provided. As proposed, if Order 
B also included a NDS instruction, the incoming sell order would 
execute against Order B and such order would become the remover of 
liquidity and the BYX Post Only Order to sell would become the 
liquidity provider. In such case, Order A cedes time priority to Order 
B because Order A did not also include a NDS instruction and thus the 
User that submitted Order A did not indicate the preference to be 
treated as the remover of liquidity in favor of an execution; instead, 
by not using NDS, a User indicates the preference to remain posted on 
the BYX Book as a liquidity provider.\17\ However, if the incoming sell 
order was priced at $10.02, it would receive sufficient price 
improvement to execute upon entry against all resting buy limit orders 
in time priority at $10.03.\18\
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    \17\ Should the limit order to buy at $10.03 with time priority 
(i.e., Order A) be displayed on the BYX Book, the incoming BYX Post 
Only Order to sell at $10.03 will not execute against the non-
displayed buy order with a NDS instruction because displayed orders 
have priority over non-displayed orders. In such a case, the 
incoming limit order would be handled as it is today in accordance 
with existing Exchange rules. See, e.g., Exchange Rules 11.9 and 
11.13(a).
    \18\ The execution occurs here because the value of the 
execution against the buy order when removing liquidity exceeds the 
value of such execution if the order instead posted to the BYX Book 
and subsequently provided liquidity, including the applicable fees 
charged or rebates provided. See supra note 13.
---------------------------------------------------------------------------

    If the order with a NDS instruction is only partially executed, the 
unexecuted portion of that order remains on the BYX Book and maintains 
its priority, as is the case today for an order that is partially 
executed and not cancelled by the User.\19\ The Exchange is proposing 
to make the NDS instruction available to limit orders \20\ that are not 
displayed on the Exchange \21\ and MidPoint Peg Orders.\22\ Because the 
NDS instruction would be only available to limit orders not displayed 
on the Exchange and to MidPoint Peg Orders, the NDS instruction would 
not be available to other order types provided by the Exchange under 
its Rule 11.9, such as BYX Market Orders, Reserve Orders, and Market 
Maker Peg Orders,\23\ as the NDS instruction would be inconsistent with 
the use of those order types. The NDS instruction could, however, be

[[Page 31231]]

combined with other instructions also available to non-displayed limit 
orders, such as the Minimum Quantity Order instruction, the Primary 
Pegged Order instruction, the Market Pegged Order instruction or the 
Discretionary Order instruction.\24\
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    \19\ See Exchange Rule 11.12(a)(5).
    \20\ See Exchange Rule 11.9(a)(1).
    \21\ See Exchange Rule 11.9(c)(11).
    \22\ See Exchange Rule 11.9(c)(9).
    \23\ See Exchange Rules 11.9(a)(2), 11.9(c)(1) and 11.9(c)(16), 
respectively.
    \24\ See Exchange Rules 11.9(c)(5), 11.9(c)(8)(A), 11.9(c)(8)(B) 
and 11.9(c)(10), respectively.
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    The Exchange notes that similar functionality exists on Nasdaq and 
Arca. Nasdaq refers to their functionality as the ``Trade Now'' 
instruction \25\ and Arca refers to their functionality as the ``Non-
Display Remove Modifier''.\26\ On Arca, a Limit Non-Displayed Order may 
be designated with a Non-Display Remove Modifier. If so designated, a 
Limit Non-Displayed Order to buy (sell) will trade as the remover of 
liquidity with an incoming Adding Liquidity Only Order (``ALO Order'') 
to sell (buy) that has a working price equal to the working price of 
the Limit Non-Displayed Order.\27\ On Nasdaq, Trade Now is an order 
attribute that allows a resting order that becomes locked by an 
incoming Displayed Order to execute against the available size of the 
contra-side locking order as a liquidity taker, and any remaining 
shares of the resting order will remain posted on the Nasdaq Book with 
the same priority.\28\ Nasdaq requires the contra-side order to be 
display eligible, while the Exchange proposes to enable an order with a 
NDS instruction to remove liquidity regardless of whether the incoming 
order would have ultimately been eligible for display consistent with 
Arca's Non-Display Remove Modifier.
---------------------------------------------------------------------------

    \25\ See Nasdaq Rule 4703(m). See also Securities and Exchange 
Act Release No. 79282 (November 10, 2016), 81 FR 81219 (November 17, 
2016) (SR-Nasdaq-2016-156) (Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change to Amend Rule 4703 and Rule 
4703 to add a ``Trade Now'' Instruction to Certain Order Types).
    \26\ See Arca Rule 7.31-E(d)(2)(B). See also Securities and 
Exchange Act Release No. 76267 (October 26, 2015), 80 FR 66951 
(October 30, 2015) (SR-NYSEArca-2015-56) (Order Approving Proposed 
Rule Change, and Notice of Filing and Order Granting Accelerated 
Approval of Amendment Nos. 1 and 2 Thereto, Adopting New Equity 
Trading Rules Relating to Orders and Modifiers and the Retail 
Liquidity Program To Reflect the Implementation of Pillar, the 
Exchange's New Trading Technology Platform) (including the Non-
Display Remove Modifier).
    \27\ See Arca Rule 7.31-E(d)(2)(b).
    \28\ Arca provides their Non-Display Remove Modifier to their 
Mid-Point Liquidity Orders (``MPL Orders'') designated Day and MPL-
ALO Orders and Arca Only Orders. Nasdaq's Trade Now functionality is 
available to Price to Comply Orders, Price to Display Orders, Non-
Displayed Orders, Post-Only Orders, Midpoint Peg Post-Only Orders, 
and Market Maker Peg Orders. To the extent the NDS instruction is 
only available to non-displayed limit orders and MidPoint Peg 
Orders, the Exchange notes that the NDS instruction will apply to 
different order types than Arca's Non-Display Remove Modifier and 
Nasdaq's Trade Now functionality.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \29\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \30\ 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 by offering Users optional 
functionality that will facilitate the execution of orders that would 
otherwise remain unexecuted, thereby increasing the efficient 
functioning of the Exchange. The NDS instruction is an optional feature 
that is intended to reflect the order management practices of various 
market participants. The proposed NDS instruction assists in the 
avoidance of an internally locked BYX Book by facilitating the 
execution of orders that would otherwise post, or remain posted, to the 
BYX Book.
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78f(b).
    \30\ 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. On 
the contrary, the Exchange believes the proposed rule change promotes 
competition because it will enable the Exchange to offer functionality 
substantially similar to that offered by Nasdaq and Arca (in addition 
to the fact that such functionality is identical to that already 
offered by the Exchange's affiliate, EDGX).\31\ Therefore, the Exchange 
does not believe the proposed rule change will result in any burden on 
intermarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. As the NDS feature will be 
equally available to all Users, the Exchange does not believe the 
proposed rule change will result in any burden on intramarket 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.
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    \31\ See supra notes 5-7.
---------------------------------------------------------------------------

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)(iii) of the Act \32\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\33\
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    \32\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \33\ 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.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of the filing. However, 
Rule 19b-4(f)(6)(iii) \34\ permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. In its filing, BYX requested that 
the Commission waive the 30-day operative delay so that the Exchange 
can implement the proposed rule change promptly after filing. The 
Exchange noted that the proposed functionality is optional, may lead to 
increased order interaction on the Exchange, and is identical to 
functionality already provided on EDGX. The Commission believes that 
waiver of the 30-day operative delay is consistent with the protection 
of investors and the public interest, as such waiver will permit the 
Exchange to update its rule without delay so that it provides the same 
optional NDS functionality as is available on EDGX and potentially 
increase order interaction on the Exchange. Accordingly, the Commission 
waives the 30-day operative delay and designates the proposed rule 
change operative upon filing.\35\
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    \34\ 17 CFR 240.19b-4(f)(6)(iii).
    \35\ 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).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the

[[Page 31232]]

Commission summarily may temporarily suspend such rule change if it 
appears to the Commission that such action is: (i) Necessary or 
appropriate in the public interest; (ii) for the protection of 
investors; or (iii) 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-2018-009 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-2018-009. 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-2018-009, and should be 
submitted on or before July 24, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\36\
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    \36\ 17 CFR 200.30-3(a)(12) and (59).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-14296 Filed 7-2-18; 8:45 am]
 BILLING CODE 8011-01-P
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