Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Exchange Rule 11.13, Order Execution and Routing, To Amend the Operation of the Super Aggressive Order Instruction, 38187-38191 [2018-16596]

Download as PDF Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Notices of the functions of the agency, including whether the information will have practical utility; (b) the accuracy of the agency’s estimate of the burden imposed by the collection of information; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication. Please direct your written comments to Pamela Dyson, Director/ Chief Information Officer, Securities and Exchange Commission, c/o Candace Kenner, 100 F St. NE, Washington DC 20549; or send an email to: PRA_ Mailbox@sec.gov. Dated: July 30, 2018. Robert W. Errett, Deputy Secretary. [FR Doc. 2018–16601 Filed 8–2–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Exchange Rule 11.13, Order Execution and Routing, To Amend the Operation of the Super Aggressive Order Instruction amozie on DSK3GDR082PROD with NOTICES1 July 30, 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 July 16, 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 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). 2 17 VerDate Sep<11>2014 18:26 Aug 02, 2018 Jkt 244001 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange filed a proposal to amend paragraph (b)(4)(C) of Exchange Rule 11.13 related to Super Aggressive order instructions. 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 [Release No. 34–83738; File No. SR– CboeBYX–2018–012] 1 15 comments on the proposed rule change from interested persons. 1. Purpose The Exchange proposes to amend the description of the Super Aggressive ReRoute instruction (‘‘Super Aggressive instruction’’) under paragraph (b)(4)(C) of Exchange Rule 11.13, Order Execution and Routing to: (i) Specify that an incoming BYX Post Only Order or Partial Post Only at Limit Order that would lock a resting order with a Super Aggressive instruction must be designated as eligible for display on the Exchange (a ‘‘displayed order’’) for the order with a Super Aggressive instruction to engage in a liquidity swap and execute against that incoming order; and (ii) modify language from the description of the Super Aggressive instruction that states if an order that does not contain a Super Aggressive instruction maintains higher priority than one or more Super Aggressive eligible orders, the Super Aggressive eligible order(s) with lower priority would not be converted and an incoming BYX Post Only Order or Partial Post Only at Limit Order would be posted or cancelled in accordance with Exchange Rule 11.9(c)(6) or 11.9(c)(7). At the outset, the Exchange notes that based on the Exchange’s current pricing PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 38187 schedule, because BYX offers rebates to remove liquidity and charges fees to add liquidity, BYX Post Only Orders and Partial Post Only at Limit Orders remove liquidity on entry against resting interest and are not booked/displayed if there is contra-side interest. As such, the descriptions below of the changes to Rule 11.13(b)(4)(C), including the examples of the revised operation of the Super Aggressive functionality are currently inapplicable because BYX Post Only Orders and Partial Post Only at Limit Orders execute against resting liquidity first, before the logic discussed below is triggered. However, consistent with its prior practice, the Exchange is proposing the changes to Rule 11.13(b)(4)(C) related to the Super Aggressive instruction in this filing in order to retain consistent rules and functionality with its affiliated exchanges 5 to the extent the Exchange decides to propose changes to its fee structure in the future such that ‘‘Post Only’’ functionality is more relevant to the operation of the Exchange. Super Aggressive is an optional order instruction that directs the System 6 to route an order when an away Trading Center locks or crosses the limit price of the order resting on the BYX Book.7 If an order with a Super Aggressive instruction were to be locked by an incoming BYX Post Only Order or Partial Post Only at Limit Order (hereafter collectively referred to as a ‘‘Post Only Order’’) that does not remove liquidity pursuant to Rule 11.9(c)(6) or 11.9(c)(7), respectively,8 5 The Exchange notes that its affiliates, Cboe BZX Exchange, Inc. and Cboe EDGX Exchange, Inc., also recently filed to adopt the functionality described in this filing and such functionality is applicable on such exchanges because orders equivalent to BYX Post Only Orders and/or Partial Post Only at Limit Orders can be entered on such exchanges and do not always remove against contra-side interest on entry pursuant to such exchanges’ fee schedules. See SR–CboeBZX–2018–051 and SR–CboeEDGX– 2018–025, each filed July 11, 2018. 6 The term ‘‘System’’ is defined as ‘‘the electronic communications and trading facility designated by the Board through which securities orders of Users are consolidated for ranking, execution and, when applicable, routing away.’’ See Exchange Rule 1.5(aa). 7 See Exchange Rule 1.5(e). 8 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. See Exchange Rule 11.9(c)(6). A Partial Post Only at Limit Order will remove liquidity from the BYX Book up to the full size of the order if, at the time of receipt, it can be executed at prices better than its limit price. See Exchange Rule 11.9(c)(7). As noted above, due to the current BYX pricing schedule, which offers rebates to remove E:\FR\FM\03AUN1.SGM Continued 03AUN1 amozie on DSK3GDR082PROD with NOTICES1 38188 Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Notices the order with a Super Aggressive instruction would be converted to an executable order and would remove liquidity against such incoming order. First, the Exchange proposes to modify the Super Aggressive instruction to require that the incoming Post Only Order that would lock a resting order with a Super Aggressive instruction must be designated as a displayed order for an execution to occur. The Super Aggressive instruction is generally utilized for best execution purposes because it enables the order to immediately attempt to access displayed liquidity on another Trading Center that is either priced equal to or better than the order with a Super Aggressive instruction’s limit price. The Super Aggressive instruction would also enable the order to execute against an equally priced incoming Post Only Order that would otherwise not execute by being willing to act as the liquidity remover in such a scenario.9 Under BYX Rules, the incoming Post Only Order could either be a displayed order or a non-displayed order for it to engage in a liquidity swap with an order with a Super Aggressive instruction resting on the BYX Book. Consistent with the Super Aggressive instruction to access liquidity displayed on other Trading Centers, the Exchange proposes to amend the Super Aggressive instruction such that an order with such instruction would execute against an equally priced incoming Post Only Order only when such order would be displayed on the BYX Book. The order with a Super Aggressive instruction would act as a liquidity remover in such a scenario. Should an equally priced incoming Post Only Order not be designated as a displayed order, the resting order with a Super Aggressive instruction would remain on the BYX Book and await an execution where it may act as a liquidity provider. An incoming Post Only Order that would also be designated as a non-displayed order would be posted to the BYX Book at its limit price, creating an internally locked non-displayed book. As is the case today, an execution would continue to occur where an incoming Post Only Order is priced more aggressively than the order with a Super Aggressive instruction resting on the BYX Book, regardless of whether the incoming Post Only Order was liquidity, Post Only Orders are not booked/ displayed if there is contra-side interest and instead remove liquidity against resting interest. Accordingly, an order with a Super Aggressive instruction will not be converted under the current fee schedule. 9 But see supra note 8. VerDate Sep<11>2014 18:26 Aug 02, 2018 Jkt 244001 designated as a displayed order or a non-displayed order.10 The Exchange notes that Users seeking to act as a liquidity remover once resting on the BYX Book in all cases (i.e., seeking to execute against incoming Post Only orders regardless of the display instruction) would be able to attach the Non-Displayed Swap (‘‘NDS’’) instruction to their order.11 The NDS instruction is similar to the Super Aggressive instruction, in that it also would be an optional order instruction that a User may include on an order that directs the Exchange to have such order, when resting on the BYX Book, execute against an incoming Post Only Order rather than have it be locked by the incoming order. Under BYX Rules, because orders with either instruction (i.e., Super Aggressive and NDS) would execute against incoming Post Only Orders regardless of whether the order is to be displayed, the instructions are currently identical with two exceptions. First, an order with a Super Aggressive instruction would not convert into a liquidity removing order and execute against a Post Only Order if there is an order on the order book with priority over such order that does not also contain a Super Aggressive instruction. As further described below, the Exchange is proposing to modify this feature of the Super Aggressive instruction. The second current distinction between the two instructions, which would remain, is that an order with a Super Aggressive instruction can be displayed on the Exchange whereas an order with the NDS instruction must be non-displayed. As amended, the additional distinction between the two instructions would be whether an order would become a liquidity removing order against any Post Only Order that would lock it (i.e., NDS) or only when the Post Only Order that would lock it also is a displayed order (i.e., Super Aggressive). The below examples illustrate the proposed behavior should the Exchange propose to change its fee schedule such that ‘‘Post Only’’ functionality is more relevant to the operation of the Exchange.12 Assume the National Best Bid and Offer (‘‘NBBO’’) is $10.00 by $10.10. An order to buy is displayed on the BYX Book at $10.00 with a Super Aggressive instruction. There are no other orders resting on the BYX Book. An order to sell at $10.00 with a Post Only that is designated as a displayed order is entered. The incoming order to sell would execute against the resting 10 See id. Exchange Rule 11.9(c)(12). 12 See supra note 8. 11 See PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 order to buy at $10.00, the locking price, because the incoming order was designated as a displayed order. The order to buy would act as the liquidity remover and the order to sell would act as the liquidity adder. However, no execution would occur if the incoming order to sell was designated as a nondisplayed order. Instead, the incoming order to sell would be posted nondisplayed to the BYX Book at $10.00, its limit price, causing the BYX Book to be internally locked. Second, the Exchange proposes to enable a Post Only Order that is designated as a displayed order to execute against an equally priced nondisplayed order with a Super Aggressive instruction where a non-displayed order without a Super Aggressive instruction maintains time priority over the Super Aggressive eligible order at that price. In such case, the non-displayed, non-Super Aggressive order would seek to remain a liquidity provider and would cede time priority to the order with a Super Aggressive instruction, which is willing to act as a liquidity remover to facilitate the execution. The Exchange proposes to effect this change by modifying language in the description of the Super Aggressive instruction to state that if an order displayed on the BYX Book does not contain a Super Aggressive instruction and maintains higher priority than one or more Super Aggressive eligible orders, the Super Aggressive eligible order(s) with lower priority will not be converted and the incoming Post Only Order will be posted or cancelled in accordance with Exchange Rule 11.9(c)(6) or Rule 11.9(c)(7). Thus, an order with a Super Aggressive instruction, whether displayed on the Exchange or nondisplayed, would never execute ahead of a displayed order that maintains time priority. Should the Exchange determine to change its fee schedule, the operation of the Super Aggressive instruction with respect to incoming contra-side orders received by the Exchange, would be designed to facilitate executions that would otherwise not occur due to the Post Only Order requirement to not remove liquidity. Users entering orders with the Super Aggressive instruction tend to be fee agnostic because an order with a Super Aggressive instruction is willing to route to an away Trading Center displaying an equally or better priced order (i.e., pay a fee at such Trading Center). Meanwhile, an order without the Super Aggressive instruction elects to remain on the BYX Book as the liquidity provider until it may execute against an incoming order that would act as the liquidity remover. E:\FR\FM\03AUN1.SGM 03AUN1 Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Notices Therefore, if the fee schedule is changed in the future, the proposed change to enable the Super Aggressive order to execute against an incoming order, regardless of whether a non-displayed order without a Super Aggressive instruction maintains priority, would be consistent with the User’s intent for both orders—one choses to remain the liquidity provider and forgo the execution while the other is willing to execute irrespective of whether it is the liquidity provider or remover. The Exchange notes that similar behavior occurs for orders utilizing the NDS instruction,13 which also would seek to engage in a liquidity swap against incoming Post Only Orders. The Exchange, however, has proposed to retain the existing limitation with respect to orders displayed on the BYX Book. The following example illustrates the operation of an order with a Super Aggressive instruction under the proposed rule change should the Exchange propose to change its fee schedule such that ‘‘Post Only’’ functionality is more relevant to the operation of the Exchange.14 Assume the NBBO is $10.00 by $10.04. There is a non-displayed Limit Order to buy resting on the BYX Book at $10.03 (‘‘Order A’’). A second non-displayed Limit Order to buy at $10.03 is then entered with a Super Aggressive instruction and has time priority behind the first Limit Order (‘‘Order B’’). A Post Only Order to sell priced at $10.03 is entered. Under current behavior, the incoming sell Post Only Order would not execute against Order A and would post to the BYX Book 15 because the value of such execution against the resting buy order 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. Further, the incoming sell Post Only Order could not execute against Order B because Order A is on the BYX Book and maintains time priority over Order B. Under the proposed change, the incoming sell order, if it was designated as a displayed order, would execute against Order B and Order B would become the remover amozie on DSK3GDR082PROD with NOTICES1 13 See Exchange Rule 11.9(c)(12). See also Securities Exchange Act Release No. 83536 (June 28, 2018), (SR–CboeBYX–2018–009) (including an example where an order cedes execution priority to an order with an NDS instruction). 14 See supra note 8. 15 Such order would be posted to the BYX Book in accordance with the Exchange’s re-pricing instructions to comply with Rule 610(d) of Regulation NMS. See Exchange Rules 11.9(g)(1) and (g)(2). See also 242 CFR 242.610(d). VerDate Sep<11>2014 18:26 Aug 02, 2018 Jkt 244001 of liquidity while the incoming sell Post Only Order would become the liquidity provider. In such case, Order A cedes priority to Order B because Order A did not also include a Super Aggressive instruction 16 and thus the User that submitted the order did not indicate the preference to be treated as the remover of liquidity in favor of an execution; instead, by not using Super Aggressive, a User indicates the preference to remain posted on the BYX Book as a liquidity provider. 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 $10.03.17 Also, if Order A was displayed on the BYX Book, no execution would occur, as the proposed change would only apply to nondisplayed liquidity. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act 18 in general, and furthers the objectives of Section 6(b)(5) of the Act 19 in particular, in that it is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. The proposed changes to the Super Aggressive order instruction are designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. The Super Aggressive instruction is an optional feature that is intended to reflect the order management practices of various market participants. The proposal to limit the execution of an order with a Super Aggressive instruction to execute against incoming Post Only Orders that also are designated as displayed orders promotes just and equitable principles 16 This behavior is consistent with the operation of the Exchange’s NDS instruction. See supra note 13. 17 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 8. 18 15 U.S.C. 78f(b). 19 15 U.S.C. 78f(b)(5). PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 38189 of trade because it would enable Users to elect an order instruction consistent with their intent to execute only against displayed orders, in part, for best execution purposes. The amended Super Aggressive instruction would ensure executions at the best available price displayed on another Trading Center or against an incoming order that would have been displayed on the BYX Book. Users seeking to act as a liquidity remover once resting on the BYX Book and execute against an incoming Post Only Order that is also designated as a non-displayed order may attach the NDS instruction to their order.20 Should the Exchange determine to change its fee schedule such that ‘‘Post Only’’ functionality is more relevant to the operation of the Exchange, the proposed change to the Super Aggressive instruction would also remove impediments to and perfect the mechanism of a free and open market and a national market system because it would be designed to facilitate executions that would otherwise not occur due to the Post Only Order requirement to not remove liquidity under such amended fee schedule.21 The proposal enables non-displayed Super Aggressive orders to execute against an incoming order, regardless of whether another non-displayed order without a Super Aggressive instruction maintains priority consistent with the User’s intent for both orders—one chooses to remain the liquidity provider and forgo the execution while the other is willing to execute irrespective of whether it is the liquidity provider or remover. The non-Super Aggressive order would seek to remain a liquidity provider and would cede its time priority to the order with a Super Aggressive instruction, which would be willing to act as a liquidity remover to facilitate the execution. It also would enable an order without the Super Aggressive instruction to remain on the BYX Book as a liquidity provider, consistent with the expected operation of their resting order. The Exchange notes that similar behavior occurs for orders utilizing the NDS 22 instruction, which also seeks to engage in a liquidity swap against incoming Post Only Orders. Finally, by limiting the proposed change to non-displayed orders, the proposal would remain consistent with NDS and also would retain existing functionality with respect to the handling of displayed orders. 20 See Exchange Rule 11.9(c)(12). supra note 8. 22 See supra note 13. 21 See E:\FR\FM\03AUN1.SGM 03AUN1 38190 Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Notices C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has neither solicited nor received written comments on the proposed rule change. B. Self-Regulatory Organization’s Statement on Burden on Competition amozie on DSK3GDR082PROD with NOTICES1 For the reasons set forth above, the Exchange believes the proposal removes impediments to and perfects the mechanism of a free and open market and a national market system, and, in general, protects investors and the public interest. 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 24 and subparagraph (f)(6) of Rule 19b–4 thereunder.25 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) 26 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 proposed changes to the Super Aggressive instruction would not impact trading under the current pricing schedule, but the Exchange noted that it intends to update its systems to implement the proposed changes on a similar schedule to its affiliates.27 BYX indicated its desire to maintain rules and functionality similar to its affiliated exchanges and noted that the proposed rule changes would be relevant if the Exchange decides to alter its pricing. Should BYX determine to change its fee schedule such that the Post Only functionality is more relevant to the operation of the Exchange, BYX stated that the proposal to allow an order with a Super Aggressive instruction to execute against an incoming Post Only order only if the Post Only order is displayable would be consistent with the use of the Super Aggressive The Exchange notes that there will be no burden on competition based on the Exchange’s current fee schedule, because as described above, Post Only Orders remove against resting contraside interest on entry, and thus, the revised functionality is inapplicable.23 Further, in the event the Exchange modifies its fee schedule, 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 proposed changes to the Super Aggressive order instruction are intended to improve the usefulness of the instruction and to align its operation with the intention of the User, resulting in enhanced competition through increased usage and execution quality on the Exchange. Thus, to the extent the change is intended to improve functionality on the Exchange to encourage Users to direct their orders to the Exchange, the change is competitive, but the Exchange does not believe the proposed change will result in any burden on intermarket competition as it is a minor change to available functionality. The proposed changes to the Super Aggressive order instruction also promote intramarket competition because they will facilitate the execution of orders that would otherwise remain unexecuted consistent with the intent of the User entering the order, thereby increasing the efficient functioning of the Exchange. Further, the Super Aggressive order instruction will remain available to all Users in the same way it is today. Thus, Users can continue to choose between various optional order instructions, including Super Aggressive, NDS, and others, depending on the order handling they prefer the Exchange to utilize. Therefore, 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. 23 See supra note 8. VerDate Sep<11>2014 18:26 Aug 02, 2018 Jkt 244001 24 15 U.S.C. 78s(b)(3)(A)(iii). 25 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. 26 17 CFR 240.19b–4(f)(6)(iii). 27 See note 4 supra. PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 instruction to access liquidity displayed on other Trading Centers. Further, according to the Exchange, users seeking to execute against incoming non-displayable Post Only orders would continue to be able to attach the NDS order instruction, as well as other order instructions that may permit such executions. In addition, the Exchange stated that the proposed priority change where non-displayed orders without a Super Aggressive instruction would cede priority to non-displayed orders with a Super Aggressive instruction is similar to, and consistent with, the Exchange’s priority ceding functionality for orders with an NDS instruction and would facilitate executions that would otherwise not occur due to an incoming Post Only order’s requirement not to remove liquidity. 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 promptly update its rules and systems to maintain consistency with its affiliate exchanges. The Commission also notes that the proposed rule change relates to optional functionality that is consistent with existing functionality and, if selected by Exchange users, may enable them to better manage their orders and may increase order interaction on the Exchange in the event the Exchange changes its fee schedule such that the Post Only functionality is more relevant to the operation of the Exchange. Accordingly, the Commission hereby waives the 30-day operative delay and designates the proposed rule change operative upon filing.28 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (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. 28 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). E:\FR\FM\03AUN1.SGM 03AUN1 Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Notices Comments may be submitted by any of the following methods: SECURITIES AND EXCHANGE COMMISSION Electronic Comments [Release No. 34–83739; File No. SR– CboeEDGA–2018–013] • 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–2018–012 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. amozie on DSK3GDR082PROD with NOTICES1 All submissions should refer to File Number SR–CboeBYX–2018–012. 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–2018–012, and should be submitted on or before August 24, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.29 Robert W. Errett, Deputy Secretary. [FR Doc. 2018–16596 Filed 8–2–18; 8:45 am] BILLING CODE 8011–01–P 29 17 18:26 Aug 02, 2018 July 30, 2018. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19–4 thereunder,2 notice is hereby given that on July 16, 2018, Cboe EDGA Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGA’’) 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 proposed rule change to amend paragraph (n)(2) of Exchange Rule 11.6 related to Super Aggressive order instructions. 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. 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). 2 17 CFR 200.30–3(a)(12) and (59). VerDate Sep<11>2014 Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Exchange Rule 11.6, Definitions, To Amend the Operation of the Super Aggressive Order Instruction Jkt 244001 PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 38191 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend the description of the Super Aggressive instruction under paragraph (n)(2) of Exchange Rule 11.6, Routing/Posting Instructions to: (i) Specify that an incoming order with a Post Only instruction that would lock a resting order with a Super Aggressive instruction must include a Displayed instruction for the order with a Super Aggressive instruction to engage in a liquidity swap and execute against that incoming order; and (ii) modify language from the description of the Super Aggressive instruction that states if an order that does not contain a Super Aggressive instruction maintains higher priority than one or more Super Aggressive eligible orders, the Super Aggressive eligible order(s) with lower priority would not be converted and the incoming order with a Post Only instruction would be posted or cancelled in accordance with Exchange Rule 11.6(n)(4).5 At the outset, the Exchange notes that based on the Exchange’s current pricing schedule, because EDGA offers rebates to remove liquidity and charges fees to add liquidity, orders with a Post Only instruction remove liquidity on entry against resting interest and are not booked/displayed if there is contra-side interest. As such, the descriptions below of the changes to Rule 11.6(n)(2), including the examples of the revised operation of the Super Aggressive functionality are currently inapplicable because orders with a Post Only instruction execute against resting liquidity first, before the logic discussed below is triggered. However, consistent with its prior practice, the Exchange is proposing the changes to Rule 11.6(n)(2) related to the Super Aggressive instruction in this filing in order to retain consistent rules and functionality with its affiliated exchanges 6 to the 5 The Exchange also proposes to remove the extraneous word ‘‘solely’’ from the second sentence of Rule 11.6(n)(2). The removal of this word does not alter the operation of the Super Aggressive order instruction. 6 The Exchange notes that its affiliates, Cboe BZX Exchange, Inc. and Cboe EDGX Exchange, Inc., also recently filed to adopt the functionality described in this filing and such functionality is applicable on such exchanges because orders equivalent to orders with a Post Only instruction can be entered on such exchanges and do not always remove against contra-side interest on entry pursuant to such exchanges’ fee schedules. See SR–CboeBZX–2018– 051 and SR–CboeEDGX–2018–025, each filed July 11, 2018. E:\FR\FM\03AUN1.SGM 03AUN1

Agencies

[Federal Register Volume 83, Number 150 (Friday, August 3, 2018)]
[Notices]
[Pages 38187-38191]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-16596]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83738; File No. SR-CboeBYX-2018-012]


Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to 
Exchange Rule 11.13, Order Execution and Routing, To Amend the 
Operation of the Super Aggressive Order Instruction

July 30, 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 July 16, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend paragraph (b)(4)(C) of 
Exchange Rule 11.13 related to Super Aggressive order instructions.
    The text of the proposed rule change is available at the Exchange's 
website at www.markets.cboe.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant parts of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the description of the Super 
Aggressive Re-Route instruction (``Super Aggressive instruction'') 
under paragraph (b)(4)(C) of Exchange Rule 11.13, Order Execution and 
Routing to: (i) Specify that an incoming BYX Post Only Order or Partial 
Post Only at Limit Order that would lock a resting order with a Super 
Aggressive instruction must be designated as eligible for display on 
the Exchange (a ``displayed order'') for the order with a Super 
Aggressive instruction to engage in a liquidity swap and execute 
against that incoming order; and (ii) modify language from the 
description of the Super Aggressive instruction that states if an order 
that does not contain a Super Aggressive instruction maintains higher 
priority than one or more Super Aggressive eligible orders, the Super 
Aggressive eligible order(s) with lower priority would not be converted 
and an incoming BYX Post Only Order or Partial Post Only at Limit Order 
would be posted or cancelled in accordance with Exchange Rule 
11.9(c)(6) or 11.9(c)(7).
    At the outset, the Exchange notes that based on the Exchange's 
current pricing schedule, because BYX offers rebates to remove 
liquidity and charges fees to add liquidity, BYX Post Only Orders and 
Partial Post Only at Limit Orders remove liquidity on entry against 
resting interest and are not booked/displayed if there is contra-side 
interest. As such, the descriptions below of the changes to Rule 
11.13(b)(4)(C), including the examples of the revised operation of the 
Super Aggressive functionality are currently inapplicable because BYX 
Post Only Orders and Partial Post Only at Limit Orders execute against 
resting liquidity first, before the logic discussed below is triggered. 
However, consistent with its prior practice, the Exchange is proposing 
the changes to Rule 11.13(b)(4)(C) related to the Super Aggressive 
instruction in this filing in order to retain consistent rules and 
functionality with its affiliated exchanges \5\ to the extent the 
Exchange decides to propose changes to its fee structure in the future 
such that ``Post Only'' functionality is more relevant to the operation 
of the Exchange.
---------------------------------------------------------------------------

    \5\ The Exchange notes that its affiliates, Cboe BZX Exchange, 
Inc. and Cboe EDGX Exchange, Inc., also recently filed to adopt the 
functionality described in this filing and such functionality is 
applicable on such exchanges because orders equivalent to BYX Post 
Only Orders and/or Partial Post Only at Limit Orders can be entered 
on such exchanges and do not always remove against contra-side 
interest on entry pursuant to such exchanges' fee schedules. See SR-
CboeBZX-2018-051 and SR-CboeEDGX-2018-025, each filed July 11, 2018.
---------------------------------------------------------------------------

    Super Aggressive is an optional order instruction that directs the 
System \6\ to route an order when an away Trading Center locks or 
crosses the limit price of the order resting on the BYX Book.\7\ If an 
order with a Super Aggressive instruction were to be locked by an 
incoming BYX Post Only Order or Partial Post Only at Limit Order 
(hereafter collectively referred to as a ``Post Only Order'') that does 
not remove liquidity pursuant to Rule 11.9(c)(6) or 11.9(c)(7), 
respectively,\8\

[[Page 38188]]

the order with a Super Aggressive instruction would be converted to an 
executable order and would remove liquidity against such incoming 
order.
---------------------------------------------------------------------------

    \6\ The term ``System'' is defined as ``the electronic 
communications and trading facility designated by the Board through 
which securities orders of Users are consolidated for ranking, 
execution and, when applicable, routing away.'' See Exchange Rule 
1.5(aa).
    \7\ See Exchange Rule 1.5(e).
    \8\ 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. See 
Exchange Rule 11.9(c)(6). A Partial Post Only at Limit Order will 
remove liquidity from the BYX Book up to the full size of the order 
if, at the time of receipt, it can be executed at prices better than 
its limit price. See Exchange Rule 11.9(c)(7). As noted above, due 
to the current BYX pricing schedule, which offers rebates to remove 
liquidity, Post Only Orders are not booked/displayed if there is 
contra-side interest and instead remove liquidity against resting 
interest. Accordingly, an order with a Super Aggressive instruction 
will not be converted under the current fee schedule.
---------------------------------------------------------------------------

    First, the Exchange proposes to modify the Super Aggressive 
instruction to require that the incoming Post Only Order that would 
lock a resting order with a Super Aggressive instruction must be 
designated as a displayed order for an execution to occur. The Super 
Aggressive instruction is generally utilized for best execution 
purposes because it enables the order to immediately attempt to access 
displayed liquidity on another Trading Center that is either priced 
equal to or better than the order with a Super Aggressive instruction's 
limit price. The Super Aggressive instruction would also enable the 
order to execute against an equally priced incoming Post Only Order 
that would otherwise not execute by being willing to act as the 
liquidity remover in such a scenario.\9\ Under BYX Rules, the incoming 
Post Only Order could either be a displayed order or a non-displayed 
order for it to engage in a liquidity swap with an order with a Super 
Aggressive instruction resting on the BYX Book.
---------------------------------------------------------------------------

    \9\ But see supra note 8.
---------------------------------------------------------------------------

    Consistent with the Super Aggressive instruction to access 
liquidity displayed on other Trading Centers, the Exchange proposes to 
amend the Super Aggressive instruction such that an order with such 
instruction would execute against an equally priced incoming Post Only 
Order only when such order would be displayed on the BYX Book. The 
order with a Super Aggressive instruction would act as a liquidity 
remover in such a scenario. Should an equally priced incoming Post Only 
Order not be designated as a displayed order, the resting order with a 
Super Aggressive instruction would remain on the BYX Book and await an 
execution where it may act as a liquidity provider. An incoming Post 
Only Order that would also be designated as a non-displayed order would 
be posted to the BYX Book at its limit price, creating an internally 
locked non-displayed book. As is the case today, an execution would 
continue to occur where an incoming Post Only Order is priced more 
aggressively than the order with a Super Aggressive instruction resting 
on the BYX Book, regardless of whether the incoming Post Only Order was 
designated as a displayed order or a non-displayed order.\10\
---------------------------------------------------------------------------

    \10\ See id.
---------------------------------------------------------------------------

    The Exchange notes that Users seeking to act as a liquidity remover 
once resting on the BYX Book in all cases (i.e., seeking to execute 
against incoming Post Only orders regardless of the display 
instruction) would be able to attach the Non-Displayed Swap (``NDS'') 
instruction to their order.\11\ The NDS instruction is similar to the 
Super Aggressive instruction, in that it also would be an optional 
order instruction that a User may include on an order that directs the 
Exchange to have such order, when resting on the BYX Book, execute 
against an incoming Post Only Order rather than have it be locked by 
the incoming order. Under BYX Rules, because orders with either 
instruction (i.e., Super Aggressive and NDS) would execute against 
incoming Post Only Orders regardless of whether the order is to be 
displayed, the instructions are currently identical with two 
exceptions. First, an order with a Super Aggressive instruction would 
not convert into a liquidity removing order and execute against a Post 
Only Order if there is an order on the order book with priority over 
such order that does not also contain a Super Aggressive instruction. 
As further described below, the Exchange is proposing to modify this 
feature of the Super Aggressive instruction. The second current 
distinction between the two instructions, which would remain, is that 
an order with a Super Aggressive instruction can be displayed on the 
Exchange whereas an order with the NDS instruction must be non-
displayed. As amended, the additional distinction between the two 
instructions would be whether an order would become a liquidity 
removing order against any Post Only Order that would lock it (i.e., 
NDS) or only when the Post Only Order that would lock it also is a 
displayed order (i.e., Super Aggressive).
---------------------------------------------------------------------------

    \11\ See Exchange Rule 11.9(c)(12).
---------------------------------------------------------------------------

    The below examples illustrate the proposed behavior should the 
Exchange propose to change its fee schedule such that ``Post Only'' 
functionality is more relevant to the operation of the Exchange.\12\ 
Assume the National Best Bid and Offer (``NBBO'') is $10.00 by $10.10. 
An order to buy is displayed on the BYX Book at $10.00 with a Super 
Aggressive instruction. There are no other orders resting on the BYX 
Book. An order to sell at $10.00 with a Post Only that is designated as 
a displayed order is entered. The incoming order to sell would execute 
against the resting order to buy at $10.00, the locking price, because 
the incoming order was designated as a displayed order. The order to 
buy would act as the liquidity remover and the order to sell would act 
as the liquidity adder. However, no execution would occur if the 
incoming order to sell was designated as a non-displayed order. 
Instead, the incoming order to sell would be posted non-displayed to 
the BYX Book at $10.00, its limit price, causing the BYX Book to be 
internally locked.
---------------------------------------------------------------------------

    \12\ See supra note 8.
---------------------------------------------------------------------------

    Second, the Exchange proposes to enable a Post Only Order that is 
designated as a displayed order to execute against an equally priced 
non-displayed order with a Super Aggressive instruction where a non-
displayed order without a Super Aggressive instruction maintains time 
priority over the Super Aggressive eligible order at that price. In 
such case, the non-displayed, non-Super Aggressive order would seek to 
remain a liquidity provider and would cede time priority to the order 
with a Super Aggressive instruction, which is willing to act as a 
liquidity remover to facilitate the execution. The Exchange proposes to 
effect this change by modifying language in the description of the 
Super Aggressive instruction to state that if an order displayed on the 
BYX Book does not contain a Super Aggressive instruction and maintains 
higher priority than one or more Super Aggressive eligible orders, the 
Super Aggressive eligible order(s) with lower priority will not be 
converted and the incoming Post Only Order will be posted or cancelled 
in accordance with Exchange Rule 11.9(c)(6) or Rule 11.9(c)(7). Thus, 
an order with a Super Aggressive instruction, whether displayed on the 
Exchange or non-displayed, would never execute ahead of a displayed 
order that maintains time priority.
    Should the Exchange determine to change its fee schedule, the 
operation of the Super Aggressive instruction with respect to incoming 
contra-side orders received by the Exchange, would be designed to 
facilitate executions that would otherwise not occur due to the Post 
Only Order requirement to not remove liquidity. Users entering orders 
with the Super Aggressive instruction tend to be fee agnostic because 
an order with a Super Aggressive instruction is willing to route to an 
away Trading Center displaying an equally or better priced order (i.e., 
pay a fee at such Trading Center). Meanwhile, an order without the 
Super Aggressive instruction elects to remain on the BYX Book as the 
liquidity provider until it may execute against an incoming order that 
would act as the liquidity remover.

[[Page 38189]]

Therefore, if the fee schedule is changed in the future, the proposed 
change to enable the Super Aggressive order to execute against an 
incoming order, regardless of whether a non-displayed order without a 
Super Aggressive instruction maintains priority, would be consistent 
with the User's intent for both orders--one choses to remain the 
liquidity provider and forgo the execution while the other is willing 
to execute irrespective of whether it is the liquidity provider or 
remover. The Exchange notes that similar behavior occurs for orders 
utilizing the NDS instruction,\13\ which also would seek to engage in a 
liquidity swap against incoming Post Only Orders. The Exchange, 
however, has proposed to retain the existing limitation with respect to 
orders displayed on the BYX Book.
---------------------------------------------------------------------------

    \13\ See Exchange Rule 11.9(c)(12). See also Securities Exchange 
Act Release No. 83536 (June 28, 2018), (SR-CboeBYX-2018-009) 
(including an example where an order cedes execution priority to an 
order with an NDS instruction).
---------------------------------------------------------------------------

    The following example illustrates the operation of an order with a 
Super Aggressive instruction under the proposed rule change should the 
Exchange propose to change its fee schedule such that ``Post Only'' 
functionality is more relevant to the operation of the Exchange.\14\ 
Assume the NBBO is $10.00 by $10.04. There is a non-displayed Limit 
Order to buy resting on the BYX Book at $10.03 (``Order A''). A second 
non-displayed Limit Order to buy at $10.03 is then entered with a Super 
Aggressive instruction and has time priority behind the first Limit 
Order (``Order B''). A Post Only Order to sell priced at $10.03 is 
entered. Under current behavior, the incoming sell Post Only Order 
would not execute against Order A and would post to the BYX Book \15\ 
because the value of such execution against the resting buy order 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. 
Further, the incoming sell Post Only Order could not execute against 
Order B because Order A is on the BYX Book and maintains time priority 
over Order B. Under the proposed change, the incoming sell order, if it 
was designated as a displayed order, would execute against Order B and 
Order B would become the remover of liquidity while the incoming sell 
Post Only Order would become the liquidity provider. In such case, 
Order A cedes priority to Order B because Order A did not also include 
a Super Aggressive instruction \16\ and thus the User that submitted 
the order did not indicate the preference to be treated as the remover 
of liquidity in favor of an execution; instead, by not using Super 
Aggressive, a User indicates the preference to remain posted on the BYX 
Book as a liquidity provider. 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.\17\ Also, if Order A was displayed on the BYX Book, 
no execution would occur, as the proposed change would only apply to 
non-displayed liquidity.
---------------------------------------------------------------------------

    \14\ See supra note 8.
    \15\ Such order would be posted to the BYX Book in accordance 
with the Exchange's re-pricing instructions to comply with Rule 
610(d) of Regulation NMS. See Exchange Rules 11.9(g)(1) and (g)(2). 
See also 242 CFR 242.610(d).
    \16\ This behavior is consistent with the operation of the 
Exchange's NDS instruction. See supra note 13.
    \17\ 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 8.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \18\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \19\ 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.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The proposed changes to the Super Aggressive order instruction are 
designed to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system and, 
in general, to protect investors and the public interest. The Super 
Aggressive instruction is an optional feature that is intended to 
reflect the order management practices of various market participants. 
The proposal to limit the execution of an order with a Super Aggressive 
instruction to execute against incoming Post Only Orders that also are 
designated as displayed orders promotes just and equitable principles 
of trade because it would enable Users to elect an order instruction 
consistent with their intent to execute only against displayed orders, 
in part, for best execution purposes. The amended Super Aggressive 
instruction would ensure executions at the best available price 
displayed on another Trading Center or against an incoming order that 
would have been displayed on the BYX Book. Users seeking to act as a 
liquidity remover once resting on the BYX Book and execute against an 
incoming Post Only Order that is also designated as a non-displayed 
order may attach the NDS instruction to their order.\20\
---------------------------------------------------------------------------

    \20\ See Exchange Rule 11.9(c)(12).
---------------------------------------------------------------------------

    Should the Exchange determine to change its fee schedule such that 
``Post Only'' functionality is more relevant to the operation of the 
Exchange, the proposed change to the Super Aggressive instruction would 
also remove impediments to and perfect the mechanism of a free and open 
market and a national market system because it would be designed to 
facilitate executions that would otherwise not occur due to the Post 
Only Order requirement to not remove liquidity under such amended fee 
schedule.\21\ The proposal enables non-displayed Super Aggressive 
orders to execute against an incoming order, regardless of whether 
another non-displayed order without a Super Aggressive instruction 
maintains priority consistent with the User's intent for both orders--
one chooses to remain the liquidity provider and forgo the execution 
while the other is willing to execute irrespective of whether it is the 
liquidity provider or remover. The non-Super Aggressive order would 
seek to remain a liquidity provider and would cede its time priority to 
the order with a Super Aggressive instruction, which would be willing 
to act as a liquidity remover to facilitate the execution. It also 
would enable an order without the Super Aggressive instruction to 
remain on the BYX Book as a liquidity provider, consistent with the 
expected operation of their resting order. The Exchange notes that 
similar behavior occurs for orders utilizing the NDS \22\ instruction, 
which also seeks to engage in a liquidity swap against incoming Post 
Only Orders. Finally, by limiting the proposed change to non-displayed 
orders, the proposal would remain consistent with NDS and also would 
retain existing functionality with respect to the handling of displayed 
orders.
---------------------------------------------------------------------------

    \21\ See supra note 8.
    \22\ See supra note 13.

---------------------------------------------------------------------------

[[Page 38190]]

    For the reasons set forth above, the Exchange believes the proposal 
removes impediments to and perfects the mechanism of a free and open 
market and a national market system, and, in general, protects 
investors and the public interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange notes that there will be no burden on competition 
based on the Exchange's current fee schedule, because as described 
above, Post Only Orders remove against resting contra-side interest on 
entry, and thus, the revised functionality is inapplicable.\23\ 
Further, in the event the Exchange modifies its fee schedule, 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 proposed changes to the Super Aggressive order instruction are 
intended to improve the usefulness of the instruction and to align its 
operation with the intention of the User, resulting in enhanced 
competition through increased usage and execution quality on the 
Exchange. Thus, to the extent the change is intended to improve 
functionality on the Exchange to encourage Users to direct their orders 
to the Exchange, the change is competitive, but the Exchange does not 
believe the proposed change will result in any burden on intermarket 
competition as it is a minor change to available functionality. The 
proposed changes to the Super Aggressive order instruction also promote 
intramarket competition because they will facilitate the execution of 
orders that would otherwise remain unexecuted consistent with the 
intent of the User entering the order, thereby increasing the efficient 
functioning of the Exchange. Further, the Super Aggressive order 
instruction will remain available to all Users in the same way it is 
today. Thus, Users can continue to choose between various optional 
order instructions, including Super Aggressive, NDS, and others, 
depending on the order handling they prefer the Exchange to utilize. 
Therefore, 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.
---------------------------------------------------------------------------

    \23\ See supra note 8.
---------------------------------------------------------------------------

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received written comments 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 \24\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\25\
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \25\ 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) \26\ 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 
proposed changes to the Super Aggressive instruction would not impact 
trading under the current pricing schedule, but the Exchange noted that 
it intends to update its systems to implement the proposed changes on a 
similar schedule to its affiliates.\27\ BYX indicated its desire to 
maintain rules and functionality similar to its affiliated exchanges 
and noted that the proposed rule changes would be relevant if the 
Exchange decides to alter its pricing.
---------------------------------------------------------------------------

    \26\ 17 CFR 240.19b-4(f)(6)(iii).
    \27\ See note 4 supra.
---------------------------------------------------------------------------

    Should BYX determine to change its fee schedule such that the Post 
Only functionality is more relevant to the operation of the Exchange, 
BYX stated that the proposal to allow an order with a Super Aggressive 
instruction to execute against an incoming Post Only order only if the 
Post Only order is displayable would be consistent with the use of the 
Super Aggressive instruction to access liquidity displayed on other 
Trading Centers. Further, according to the Exchange, users seeking to 
execute against incoming non-displayable Post Only orders would 
continue to be able to attach the NDS order instruction, as well as 
other order instructions that may permit such executions. In addition, 
the Exchange stated that the proposed priority change where non-
displayed orders without a Super Aggressive instruction would cede 
priority to non-displayed orders with a Super Aggressive instruction is 
similar to, and consistent with, the Exchange's priority ceding 
functionality for orders with an NDS instruction and would facilitate 
executions that would otherwise not occur due to an incoming Post Only 
order's requirement not to remove liquidity.
    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 promptly update its rules 
and systems to maintain consistency with its affiliate exchanges. The 
Commission also notes that the proposed rule change relates to optional 
functionality that is consistent with existing functionality and, if 
selected by Exchange users, may enable them to better manage their 
orders and may increase order interaction on the Exchange in the event 
the Exchange changes its fee schedule such that the Post Only 
functionality is more relevant to the operation of the Exchange. 
Accordingly, the Commission hereby waives the 30-day operative delay 
and designates the proposed rule change operative upon filing.\28\
---------------------------------------------------------------------------

    \28\ 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 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.

[[Page 38191]]

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-2018-012 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-2018-012. 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-2018-012, and should be 
submitted on or before August 24, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
---------------------------------------------------------------------------

    \29\ 17 CFR 200.30-3(a)(12) and (59).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2018-16596 Filed 8-2-18; 8:45 am]
 BILLING CODE 8011-01-P
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.