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, 38191-38195 [2018-16597]

Download as PDF 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 38192 Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Notices amozie on DSK3GDR082PROD with NOTICES1 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 7 to route an order when an away Trading Center locks or crosses the limit price of the order resting on the EDGA Book.8 If an order with a Super Aggressive instruction were to be locked by an incoming order with a Post Only instruction that does not remove liquidity pursuant to Rule 11.6(n)(4),9 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 order with a Post Only instruction that would lock a resting order with a Super Aggressive instruction must include a Displayed instruction 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 order with a Post Only instruction that would otherwise not execute by being willing to act as the liquidity remover in such a scenario.10 Under EDGA Rules, the incoming order with a Post Only instruction could include either a Displayed or Non-Displayed instruction for it to engage in a liquidity swap with an order with a Super Aggressive instruction resting on the EDGA Book. 7 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(cc). 8 See Exchange Rule 1.5(d). 9 The Exchange will execute an order with a Post Only instruction priced at or above $1.00 in certain circumstances where the value of such execution when removing liquidity equals or exceeds the value of such execution if the order instead posted to the EDGA Book and subsequently provided liquidity, including the applicable fees charged or rebates provided. See Exchange Rule 11.6(n)(4). As noted above, due to the current EDGA pricing schedule, which offers rebates to remove liquidity, orders with a Post Only instruction 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. 10 But see supra note 9. VerDate Sep<11>2014 18:26 Aug 02, 2018 Jkt 244001 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 order with a Post Only instruction only when such order would be displayed on the EDGA Book. The order with a Super Aggressive instruction would act as a liquidity remover in such a scenario. Should an equally priced incoming order with a Post Only instruction not include a Displayed instruction, the resting order with a Super Aggressive instruction would remain on the EDGA Book and await an execution where it may act as a liquidity provider. An incoming order with a Post Only instruction and a Non-Displayed instruction would be posted to the EDGA 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 order with a Post Only instruction is priced more aggressively than the order with a Super Aggressive instruction resting on the EDGA Book, regardless of whether the incoming order included a Displayed or NonDisplayed instruction.11 The Exchange notes that Users seeking to act as a liquidity remover once resting on the EDGA 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.12 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 EDGA Book, execute against an incoming order with a Post Only instruction rather than have it be locked by the incoming order. Under EDGA Rules, because orders with either instruction (i.e., Super Aggressive and NDS) would execute against incoming orders with a Post Only instruction 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 an order with a Post Only instruction 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 11 See 12 See PO 00000 id. Exchange Rule 11.6(n)(7). Frm 00077 Fmt 4703 Sfmt 4703 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 order with a Post Only instruction that would lock it (i.e., NDS) or only when the order with a Post Only instruction that would lock it also contains a Displayed instruction (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.13 Assume the National Best Bid and Offer (‘‘NBBO’’) is $10.00 by $10.10. An order to buy is displayed on the EDGA Book at $10.00 with a Super Aggressive instruction. There are no other orders resting on the EDGA Book. An order to sell at $10.00 with a Post Only and Displayed instruction 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 included a Displayed instruction. 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 included a Non-Displayed instruction. Instead, the incoming order to sell would be posted non-displayed to the EDGA Book at $10.00, its limit price, causing the EDGA Book to be internally locked. Second, the Exchange proposes to enable an incoming order with a Post Only instruction and Displayed instruction 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 EDGA Book does 13 See E:\FR\FM\03AUN1.SGM supra note 9. 03AUN1 amozie on DSK3GDR082PROD with NOTICES1 Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Notices 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 order with a Post Only instruction will be posted or cancelled in accordance with Exchange Rule 11.6(n)(4). 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 instruction 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 EDGA Book as the liquidity provider until it may execute against an incoming order that would act as the liquidity remover. 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 nondisplayed 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,14 which also would seek to engage in a liquidity swap against incoming orders with a Post Only instruction. The Exchange, however, has proposed to retain the existing limitation with respect to orders displayed on the EDGA 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’’ 14 See Exchange Rule 11.6(n)(7). See also Securities Exchange Act Release No. 83521 (June 26, 2018) (SR-CboeEDGA–2018–011) (including an example where an order cedes execution priority to an order with an NDS instruction). VerDate Sep<11>2014 18:26 Aug 02, 2018 Jkt 244001 functionality is more relevant to the operation of the Exchange.15 Assume the NBBO is $10.00 by $10.04. There is a non-displayed Limit Order to buy resting on the EDGA 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’’). An order to sell with a Post Only instruction priced at $10.03 is entered. Under current behavior, the incoming sell order with a Post Only instruction would not execute against Order A and would post to the EDGA Book 16 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 EDGA Book and subsequently provided liquidity, including the applicable fees charged or rebates provided. Further, the incoming sell order with a Post Only instruction could not execute against Order B because Order A is on the EDGA Book and maintains time priority over Order B. Under the proposed change, the incoming sell order, if it contained a Displayed instruction, would execute against Order B and Order B would become the remover of liquidity while the incoming sell order with a Post Only instruction 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 17 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 EDGA 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 $10.03.18 Also, if Order A was displayed on the EDGA Book, no execution would occur, as the proposed 15 See supra note 9. order would be posted to the EDGA Book in accordance with the Exchange’s re-pricing instructions to comply with Rule 610(d) of Regulation NMS. See Exchange Rule 11.6(l)(1). See also 242 CFR 242.610(d). 17 This behavior is consistent with the operation of the Exchange’s NDS instruction. See supra note 14. 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 EDGA Book and subsequently provided liquidity, including the applicable fees charged or rebates provided. See supra note 9. 16 Such PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 38193 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 19 in general, and furthers the objectives of Section 6(b)(5) of the Act 20 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 orders with a Post Only instruction that also contain a Displayed instruction 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 EDGA Book. Users seeking to act as a liquidity remover once resting on the EDGA Book and execute against an incoming order with a Post Only and Non-Displayed instruction may attach the NDS instruction to their order.21 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 19 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 21 See Exchange Rule 11.6(n)(7). 20 15 E:\FR\FM\03AUN1.SGM 03AUN1 38194 Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Notices amozie on DSK3GDR082PROD with NOTICES1 executions that would otherwise not occur due to the Post Only instruction requirement to not remove liquidity under such amended fee schedule.22 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 EDGA 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 23 instruction, which also seeks to engage in a liquidity swap against incoming orders with a Post Only instruction. Finally, by limiting the proposed change to nondisplayed orders, the proposal would remain consistent with NDS and also would retain existing functionality with respect to the handling of displayed orders. 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 contraside interest on entry, and thus, the revised functionality is inapplicable.24 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 22 See supra note 9. supra note 14. 24 See supra note 9. 23 See VerDate Sep<11>2014 18:26 Aug 02, 2018 Jkt 244001 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. 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 25 and subparagraph (f)(6) of Rule 19b–4 thereunder.26 A proposed rule change filed under Rule 19b–4(f)(6) normally does not 25 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. 26 17 PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 become operative for 30 days after the date of the filing. However, Rule 19b– 4(f)(6)(iii) 27 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, EDGA 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.28 EDGA 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 EDGA determine to change its fee schedule such that the Post Only functionality is more relevant to the operation of the Exchange, EDGA 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 27 17 CFR 240.19b-4(f)(6)(iii). note 6 supra. 28 See E:\FR\FM\03AUN1.SGM 03AUN1 Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Notices 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.29 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. Comments may be submitted by any of the following methods: amozie on DSK3GDR082PROD with NOTICES1 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– CboeEDGA–2018–013 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–CboeEDGA–2018–013. 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 29 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). VerDate Sep<11>2014 18:26 Aug 02, 2018 Jkt 244001 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–CboeEDGA–2018–013, and should be submitted on or before August 24, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.30 Robert W. Errett, Deputy Secretary. [FR Doc. 2018–16597 Filed 8–2–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–83740; File No. SR–NYSE– 2018–33] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change To Amend Rule 2 To Remove Requirement That a Registered BrokerDealer Be a Member of the Financial Industry Regulatory Authority, Inc. or Another National Securities Exchange July 30, 2018. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on July 25, 2018, New York Stock Exchange LLC (‘‘NYSE’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the selfregulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. CFR 200.30–3(a)(12) and (59). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 38195 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 2 to remove a requirement that a registered broker-dealer be a member of the Financial Industry Regulatory Authority, Inc. or another national securities exchange. The proposed rule change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend the definition of ‘‘member organization’’ under Rule 2 (‘‘Member,’’ ‘‘Membership,’’ ‘‘Membership [sic] Firm,’’ etc.) to remove a requirement that a registered broker-dealer seeking to be a member organization be a member of FINRA or another national securities exchange. In 2007, the Exchange amended Rule 2 to require FINRA membership as part of the consolidation of member firm regulatory functions of then NASD and NYSE Regulation, Inc. (‘‘NYSE Regulation’’) that resulted in a combined self-regulatory organization (‘‘SRO’’) that is now known as FINRA.4 As part of the consolidation, NYSE Regulation and NASD sought to harmonize certain of their member firm rules. At that time, it was anticipated that the rule harmonization would not be completed by the time NASD and NYSE Regulation completed their combination. Therefore, the combination contemplated a transition period during which FINRA would apply to NYSE member organizations 30 17 1 15 PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 4 See Securities Exchange Act Release No. 56654 (October 12, 2007), 72 FR 59129 (October 18, 2007) (SR–NYSE–2007–67). E:\FR\FM\03AUN1.SGM 03AUN1

Agencies

[Federal Register Volume 83, Number 150 (Friday, August 3, 2018)]
[Notices]
[Pages 38191-38195]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-16597]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83739; File No. SR-CboeEDGA-2018-013]


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

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 ``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 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.

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\
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    \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.
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    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

[[Page 38192]]

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.
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    \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.
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    Super Aggressive is an optional order instruction that directs the 
System \7\ to route an order when an away Trading Center locks or 
crosses the limit price of the order resting on the EDGA Book.\8\ If an 
order with a Super Aggressive instruction were to be locked by an 
incoming order with a Post Only instruction that does not remove 
liquidity pursuant to Rule 11.6(n)(4),\9\ the order with a Super 
Aggressive instruction would be converted to an executable order and 
would remove liquidity against such incoming order.
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    \7\ 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(cc).
    \8\ See Exchange Rule 1.5(d).
    \9\ The Exchange will execute an order with a Post Only 
instruction priced at or above $1.00 in certain circumstances where 
the value of such execution when removing liquidity equals or 
exceeds the value of such execution if the order instead posted to 
the EDGA Book and subsequently provided liquidity, including the 
applicable fees charged or rebates provided. See Exchange Rule 
11.6(n)(4). As noted above, due to the current EDGA pricing 
schedule, which offers rebates to remove liquidity, orders with a 
Post Only instruction 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.
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    First, the Exchange proposes to modify the Super Aggressive 
instruction to require that the incoming order with a Post Only 
instruction that would lock a resting order with a Super Aggressive 
instruction must include a Displayed instruction 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 order 
with a Post Only instruction that would otherwise not execute by being 
willing to act as the liquidity remover in such a scenario.\10\ Under 
EDGA Rules, the incoming order with a Post Only instruction could 
include either a Displayed or Non-Displayed instruction for it to 
engage in a liquidity swap with an order with a Super Aggressive 
instruction resting on the EDGA Book.
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    \10\ But see supra note 9.
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    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 order with 
a Post Only instruction only when such order would be displayed on the 
EDGA Book. The order with a Super Aggressive instruction would act as a 
liquidity remover in such a scenario. Should an equally priced incoming 
order with a Post Only instruction not include a Displayed instruction, 
the resting order with a Super Aggressive instruction would remain on 
the EDGA Book and await an execution where it may act as a liquidity 
provider. An incoming order with a Post Only instruction and a Non-
Displayed instruction would be posted to the EDGA 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 order 
with a Post Only instruction is priced more aggressively than the order 
with a Super Aggressive instruction resting on the EDGA Book, 
regardless of whether the incoming order included a Displayed or Non-
Displayed instruction.\11\
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    \11\ See id.
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    The Exchange notes that Users seeking to act as a liquidity remover 
once resting on the EDGA 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.\12\ 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 EDGA Book, execute 
against an incoming order with a Post Only instruction rather than have 
it be locked by the incoming order. Under EDGA Rules, because orders 
with either instruction (i.e., Super Aggressive and NDS) would execute 
against incoming orders with a Post Only instruction 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 an order with a Post Only instruction 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 order with a 
Post Only instruction that would lock it (i.e., NDS) or only when the 
order with a Post Only instruction that would lock it also contains a 
Displayed instruction (i.e., Super Aggressive).
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    \12\ See Exchange Rule 11.6(n)(7).
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    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.\13\ 
Assume the National Best Bid and Offer (``NBBO'') is $10.00 by $10.10. 
An order to buy is displayed on the EDGA Book at $10.00 with a Super 
Aggressive instruction. There are no other orders resting on the EDGA 
Book. An order to sell at $10.00 with a Post Only and Displayed 
instruction 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 included a Displayed instruction. 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 included a Non-Displayed instruction. Instead, the 
incoming order to sell would be posted non-displayed to the EDGA Book 
at $10.00, its limit price, causing the EDGA Book to be internally 
locked.
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    \13\ See supra note 9.
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    Second, the Exchange proposes to enable an incoming order with a 
Post Only instruction and Displayed instruction 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 EDGA Book does

[[Page 38193]]

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 order with a Post Only instruction will be posted or 
cancelled in accordance with Exchange Rule 11.6(n)(4). 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 instruction 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 EDGA 
Book as the liquidity provider until it may execute against an incoming 
order that would act as the liquidity remover. 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,\14\ 
which also would seek to engage in a liquidity swap against incoming 
orders with a Post Only instruction. The Exchange, however, has 
proposed to retain the existing limitation with respect to orders 
displayed on the EDGA Book.
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    \14\ See Exchange Rule 11.6(n)(7). See also Securities Exchange 
Act Release No. 83521 (June 26, 2018) (SR-CboeEDGA-2018-011) 
(including an example where an order cedes execution priority to an 
order with an NDS instruction).
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    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.\15\ 
Assume the NBBO is $10.00 by $10.04. There is a non-displayed Limit 
Order to buy resting on the EDGA 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''). An order to sell with a Post Only instruction 
priced at $10.03 is entered. Under current behavior, the incoming sell 
order with a Post Only instruction would not execute against Order A 
and would post to the EDGA Book \16\ 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 EDGA Book and subsequently provided liquidity, including 
the applicable fees charged or rebates provided. Further, the incoming 
sell order with a Post Only instruction could not execute against Order 
B because Order A is on the EDGA Book and maintains time priority over 
Order B. Under the proposed change, the incoming sell order, if it 
contained a Displayed instruction, would execute against Order B and 
Order B would become the remover of liquidity while the incoming sell 
order with a Post Only instruction 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 \17\ 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 EDGA 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.\18\ Also, if Order A was displayed 
on the EDGA Book, no execution would occur, as the proposed change 
would only apply to non-displayed liquidity.
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    \15\ See supra note 9.
    \16\ Such order would be posted to the EDGA Book in accordance 
with the Exchange's re-pricing instructions to comply with Rule 
610(d) of Regulation NMS. See Exchange Rule 11.6(l)(1). See also 242 
CFR 242.610(d).
    \17\ This behavior is consistent with the operation of the 
Exchange's NDS instruction. See supra note 14.
    \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 EDGA Book 
and subsequently provided liquidity, including the applicable fees 
charged or rebates provided. See supra note 9.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \19\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \20\ 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.
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    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(5).
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    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 orders with a Post Only 
instruction that also contain a Displayed instruction 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 EDGA Book. Users 
seeking to act as a liquidity remover once resting on the EDGA Book and 
execute against an incoming order with a Post Only and Non-Displayed 
instruction may attach the NDS instruction to their order.\21\
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    \21\ See Exchange Rule 11.6(n)(7).
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    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

[[Page 38194]]

executions that would otherwise not occur due to the Post Only 
instruction requirement to not remove liquidity under such amended fee 
schedule.\22\ 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 EDGA 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 \23\ instruction, 
which also seeks to engage in a liquidity swap against incoming orders 
with a Post Only instruction. 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.
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    \22\ See supra note 9.
    \23\ See supra note 14.
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    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.\24\ 
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.
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    \24\ See supra note 9.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No comments were solicited or received on the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \25\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\26\
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    \25\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \26\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of the filing. However, 
Rule 19b-4(f)(6)(iii) \27\ 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, EDGA 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.\28\ EDGA 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.
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    \27\ 17 CFR 240.19b-4(f)(6)(iii).
    \28\ See note 6 supra.
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    Should EDGA determine to change its fee schedule such that the Post 
Only functionality is more relevant to the operation of the Exchange, 
EDGA 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

[[Page 38195]]

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.\29\
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    \29\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (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-CboeEDGA-2018-013 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-CboeEDGA-2018-013. 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-CboeEDGA-2018-013, and should be 
submitted on or before August 24, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
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    \30\ 17 CFR 200.30-3(a)(12) and (59).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2018-16597 Filed 8-2-18; 8:45 am]
 BILLING CODE 8011-01-P
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