Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Amending Rule 21.7 Concerning the Opening Auction Process, 26492-26494 [2019-11797]
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26492
Federal Register / Vol. 84, No. 109 / Thursday, June 6, 2019 / Notices
initial Form ATS–N disclosures and
discussions with Commission staff have
revealed complexities about the
operations of Legacy NMS Stock ATSs
including, among other things, matching
functionalities, means of order entry,
order interaction and execution
procedures, conditional order processes,
segmentation of orders, and
counterparty selection protocols. The
Commission staff needs additional time
to review novel and complex issues
such as these, which Commission staff
has discussed with Virtu MatchIt ATS.
Extending the initial Form ATS–N
Commission review period for an
additional 120 calendar days will
provide Commission staff an
opportunity to continue its review of the
initial Form ATS–N disclosures and
discussions with Virtu MatchIt ATS.
In the conversations between Virtu
MatchIt ATS and Commission staff
about the initial Form ATS–N
disclosures and the ATS operations,
Commission staff and Virtu MatchIt
ATS have discussed a potential
amendment to update Virtu MatchIt
ATS’s disclosures regarding the
complexities of its operations.
Extending the review period will enable
the NMS Stock ATS to amend its
disclosures, if appropriate, and allow
Commission staff to conduct a thorough
review of amendments to the initial
disclosures provided on the initial Form
ATS–N.
For the reasons given above, the
Commission is extending the review
period of the initial Form ATS–N
submitted by Virtu MatchIt ATS.
Accordingly, pursuant to Rule
304(a)(1)(iv)(B), October 11, 2019 is the
date by which the Commission may
declare the initial Form ATS–N
submitted by Virtu MatchIt ATS
ineffective.
By the Commission.
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–11839 Filed 6–5–19; 8:45 am]
khammond on DSKBBV9HB2PROD with NOTICES
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–85988; File No. SR–
CboeEDGX–2019–033]
Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change Amending Rule
21.7 Concerning the Opening Auction
Process
May 31, 2019.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on May 22,
2019, Cboe EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Exchange filed the
proposal as a ‘‘non-controversial’’
proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) thereunder.4 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
Cboe EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX Options’’)
proposes to amend Rule 21.7. The text
of the proposed rule change is provided
in Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
options/regulation/rule_filings/edgx/),
at the Exchange’s Office of the
Secretary, 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 aspects of such
statements.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
2 17
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The proposed rule change makes
enhancements to the Exchange’s
opening auction process. The Exchange
recently adopted an opening auction
process, which the Exchange intends to
implement on June 24, 2019.5 The
Exchange intends to implement the
enhancements proposed in this rule
filing at that time.
First, the proposed rule change
amends the definition of Composite
Market in Rule 21.7(a). The term
‘‘Composite Market’’ means the market
for a series comprised of (1) the higher
of the then-current best appointed
Market-Maker bulk message bid on the
Queuing Book and the away best bid
(‘‘ABB’’) (if there is an ABB) and (2) the
lower of the then-current best appointed
Market-Maker bulk message offer on the
Queuing Book and the away best offer
(‘‘ABO’’) (if there is an ABO).6 The
Queuing Book means the book into
which Users may submit orders and
quotes (and onto which good-tilcancelled and good-til-day orders
remaining on the Book from the
previous trading session or trading day,
as applicable, are entered) during the
Queuing Period for participation in the
applicable opening rotation. The
Queuing Period means the time period
prior to the initiation of an opening
rotation during which the System
accepts orders and quotes for
participation in the opening rotation for
the applicable trading session.
Therefore, in an All Sessions Class (i.e.,
a class that trades during both the
Global Trading Hours (‘‘GTH’’) and
Regular Trading Hours (‘‘RTH’’) trading
sessions), the Composite Market will be
based on the appointed Market-Maker
bulk message bids and offers in the RTH
Queuing Book (available from 7:30 a.m.
through the opening of trading). It
currently will not consider any
appointed Market-Maker bulk message
bids and offers in that class in the GTH
book (on which trading will be
occurring in that class from 8:30 a.m.
through 9:15 a.m.).
Market-Makers are generally
responsible for pricing the markets in
5 See Securities Exchange Act Release No. 85797
(May 7, 2019), 84 FR 20920 (May 13, 2019), SR–
CboeEDGX–2019–027. The changes in SR–
CboeEDGX–2019–027 are currently effective but not
yet operative; however, the proposed rule text in
this rule filing assume operativeness of those
effective changes.
6 The term ‘‘Composite Bid (Offer)’’ means the bid
(offer) used to determine the Composite Market.
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their appointed classes, which is why
the Exchange considers Market-Makers’
bulk message bids and offers when
determining the Composite Market in
connection with the opening auction
process. For that reason, the price
protection measures applied during the
opening auction process (the Maximum
Composite Width check and the
Opening Collar) are based on the
Composite Market. The Exchange
believes it would be beneficial, and may
lead to more accurate pricing during the
opening auction process, for the
Composite Market to be used for the
RTH opening auction process to
incorporate all available bulk message
bids and offers from appointed MarketMakers, including any in the GTH book.
Therefore, the proposed rule change
amends the definition of Composite
Market to provide that it will be
comprised of the higher (lower) of the
then-current best appointed MarketMaker bulk message bid (offer) on the
Exchange (which includes both the RTH
Queuing Book and the GTH book),
rather than just the Queuing Book.
Second, the proposed rule change
amends Rule 21.7(e)(1) to provide that
a series is not eligible to open if the
Composite Market is crossed (i.e., the
Composite Bid is higher than the
Composite Offer). A series will be
eligible to open if the Composite Width
is less than or equal to the Maximum
Composite Width, or is greater than the
Maximum Composite Width but there
are no non-M Capacity market orders or
buy (sell) limit orders with prices higher
(lower) than the Composite Bid (Offer)
and no orders or quotes marketable
against each other (i.e., locked or
crossed).7 The Maximum Composite
Width Check is a price protection
measure intended to prevent orders
from executing at extreme prices at the
open. A crossed market is generally
unreliable, and opening with a crossed
Composite Market may create price risk
for any executions that may occur
during the opening rotation (pursuant to
subparagraph (e)(3)). Therefore, the
proposed rule change enhances the
Maximum Composite Width check price
protection to provide that the Composite
Market may not be crossed for a series
to be eligible to open.
Third, the proposed rule change
harmonizes how the opening auction
process will be used following all
trading halts. Current Rule 21.7(g)
7 The proposed rule change makes a
nonsubstantive change to this language in Rule
21.7(e)(1)(B). Once a series satisfies the conditions
in the Maximum Composite Width Check, the
System will determine an Opening Trading Price
pursuant to Rule 21.7(e)(2), and then open the
series pursuant to Rule 21.7(e)(3).
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provides that if there is a Regulatory
Halt,8 the Queuing Period begins
immediately when the Exchange halts
trading in the class. If the Exchange
declares any other type of halt in a class
(i.e., a non-Regulatory Halt), there will
be no Queuing Period. Additionally, if
there is a Regulatory Halt, the System
queues a User’s open orders or quotes,
unless the User entered instructions to
cancel its open resting orders and
quotes, but if there is a non-Regulatory
Halt, the System cancels a User’s open
orders and quotes. The Exchange has
determined to eliminate the distinction
between how the opening auction
process applies following a Regulatory
Halt and a non-Regulatory Halt. The
proposed rule change provides that the
opening auction process following any
trading halt will apply in the manner it
currently applies following a Regulatory
Halt. In other words, following a nonRegulatory Halt, there will be a Queuing
Period during the trading halt.
Additionally, in the event of a nonRegulatory Halt, the System will queue
a User’s orders and quotes resting on the
book at the time of the trading halt for
participation in the opening rotation
following the trading halt, unless the
User entered instructions to cancels its
resting orders and quotes. This will
provide Users with the ability to decide
how its resting orders and quotes should
be handled in the event of a nonRegulatory Halt, as they are currently
able to do in the event of a Regulatory
Halt. The Exchange also believes
elimination of this distinction will
eliminate potential investor confusion
regarding how the System will handle
orders and quotes in the event of a
trading halt.9
Finally, the proposed rule change
makes several nonsubstantive changes
in Rule 21.7:
• The proposed rule change makes a
grammatical change in subparagraph
(b)(2).
• The proposed rule change adds the
word ‘‘process’’ in subparagraph
(b)(2)(E) after the term ‘‘opening
auction,’’ as it was inadvertently
omitted (throughout Rule 21.7, the
entire opening is referred to as the
‘‘opening auction process’’).
The proposed rule change updates
subparagraph (e)(2) to clarify when the
System will and will not be able to
determine an Opening Trade Price. The
System determines an Opening Trade
Price if there are orders and quotes
8 If the primary market for the applicable
underlying security declares a regulatory trading
halt, suspension, or pause with respect to such
security, it is referred to as a ‘‘Regulatory Halt.’’
9 The proposed rule change also makes
nonsubstantive changes to paragraph (g).
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26493
marketable against each other at a price
not outside the Opening Collar (this is
consistent with the current rule, which
states there is no Opening Trade Price
if there are no locked or crossed orders
or quotes (i.e., marketable orders and
quotes) at a price not outside the
Opening Collar). The proposed rule
change merely modifies the language,
which the Exchange believes is clearer,
and makes corresponding changes to the
paragraph numbering and lettering.
Additionally, the proposed rule change
adds the defined term ‘‘VMIM price’’,
which is the price determined by the
process described in current
subparagraphs (e)(2)(A)(i) through (iii)
(proposed subparagraphs (e)(2)(A)
through (3)). The proposed rule change
does not modify the process used to
determine that price.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the
Securities Exchange Act of 1934 (the
‘‘Act’’) and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.10 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 11 requirements that the rules of
an exchange be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in regulating, clearing, settling,
processing information with respect to,
and 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.
Additionally, the Exchange believes the
proposed rule change is consistent with
the Section 6(b)(5) 12 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the proposed revision to
the definition of Composite Market will
remove impediments to and perfect the
mechanism of a free and open market
and a national market system and
protect investors, because it will ensure
the price protection measures used
during the opening auction process,
which are based on the Composite
Market, for the RTH opening in an All
Sessions Class will incorporate all
available pricing information on the
Exchange from appointed Market10 15
11 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
12 Id.
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Federal Register / Vol. 84, No. 109 / Thursday, June 6, 2019 / Notices
Makers in that class. The Exchange
believes this may lead to a more
accurate Opening Trade Price. The
proposed rule change to not open a
series if the Composite Market is
crossed will promote just and equitable
principles of trade and protect investors,
because crossed markets are generally
unreliable. The Exchange believes not
opening a series if the Composite
Market is crossed may reduce the risk of
erroneously priced executions during
the opening rotation. The proposed rule
change to harmonize the opening
auction process following all types of
trading halts will protect investors by
eliminating potential confusion
regarding how the Exchange will open
series following trading halts, and by
providing Users with flexibility
regarding how the System will handle
their orders and quotes following a nonRegulatory Halt (as they currently have
following a Regulatory Halt). The
proposed nonsubstantive changes will
benefit investors by providing
additional clarity to the Rules.
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B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change will not impose
any burden on intramarket competition
that is not necessary or appropriate in
furtherance of the purposes of the Act.
The proposed changes to the price
protection measures used during the
opening auction process will apply in
the same manner to all orders and
quotes of all Users. All Users will have
the same flexibility regarding how the
System will handle their orders and
quotes following non-Regulatory Halts,
which is the same flexibility currently
available to Users following Regulatory
Halts. If a User wants its orders and
quotes to be handled following a nonRegulatory Halt in the manner they are
today, that User can instruct the
Exchange to do so. The proposed rule
change will not impose any burden on
intermarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed changes to the price
protections used during the opening
auction process only impact how series
will open on the Exchange prior to the
opening of trading. The proposed
changes are intended to enhance the
price protections used during the
opening process and are not intended as
competitive changes, and to provide
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Users with flexibility with respect to the
handling of their orders and quotes
following a non-Regulatory Halt. The
proposed nonsubstantive changes do
not impact trading, and thus have no
competitive impact; they merely
provide additional clarity to the Rules.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received 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 13 and
subparagraph (f)(6) of Rule 19b–4
thereunder.14
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change 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:
13 15
U.S.C. 78s(b)(3)(A)(iii).
14 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
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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–
CboeEDGX–2019–033 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–CboeEDGX–2019–033. 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–CboeEDGX–2019–033 and
should be submitted on or before June
27, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–11797 Filed 6–5–19; 8:45 am]
BILLING CODE 8011–01–P
15 17
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CFR 200.30–3(a)(12).
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Agencies
[Federal Register Volume 84, Number 109 (Thursday, June 6, 2019)]
[Notices]
[Pages 26492-26494]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-11797]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85988; File No. SR-CboeEDGX-2019-033]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change
Amending Rule 21.7 Concerning the Opening Auction Process
May 31, 2019.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on May 22, 2019, Cboe EDGX Exchange, Inc. (the ``Exchange'' or
``EDGX'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the Exchange. The Exchange
filed the proposal as a ``non-controversial'' proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ 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)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX Options'')
proposes to amend Rule 21.7. The text of the proposed rule change is
provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (https://markets.cboe.com/us/options/regulation/rule_filings/edgx/), at the Exchange's Office of the Secretary, 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 aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The proposed rule change makes enhancements to the Exchange's
opening auction process. The Exchange recently adopted an opening
auction process, which the Exchange intends to implement on June 24,
2019.\5\ The Exchange intends to implement the enhancements proposed in
this rule filing at that time.
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 85797 (May 7, 2019),
84 FR 20920 (May 13, 2019), SR-CboeEDGX-2019-027. The changes in SR-
CboeEDGX-2019-027 are currently effective but not yet operative;
however, the proposed rule text in this rule filing assume
operativeness of those effective changes.
---------------------------------------------------------------------------
First, the proposed rule change amends the definition of Composite
Market in Rule 21.7(a). The term ``Composite Market'' means the market
for a series comprised of (1) the higher of the then-current best
appointed Market-Maker bulk message bid on the Queuing Book and the
away best bid (``ABB'') (if there is an ABB) and (2) the lower of the
then-current best appointed Market-Maker bulk message offer on the
Queuing Book and the away best offer (``ABO'') (if there is an ABO).\6\
The Queuing Book means the book into which Users may submit orders and
quotes (and onto which good-til-cancelled and good-til-day orders
remaining on the Book from the previous trading session or trading day,
as applicable, are entered) during the Queuing Period for participation
in the applicable opening rotation. The Queuing Period means the time
period prior to the initiation of an opening rotation during which the
System accepts orders and quotes for participation in the opening
rotation for the applicable trading session. Therefore, in an All
Sessions Class (i.e., a class that trades during both the Global
Trading Hours (``GTH'') and Regular Trading Hours (``RTH'') trading
sessions), the Composite Market will be based on the appointed Market-
Maker bulk message bids and offers in the RTH Queuing Book (available
from 7:30 a.m. through the opening of trading). It currently will not
consider any appointed Market-Maker bulk message bids and offers in
that class in the GTH book (on which trading will be occurring in that
class from 8:30 a.m. through 9:15 a.m.).
---------------------------------------------------------------------------
\6\ The term ``Composite Bid (Offer)'' means the bid (offer)
used to determine the Composite Market.
---------------------------------------------------------------------------
Market-Makers are generally responsible for pricing the markets in
[[Page 26493]]
their appointed classes, which is why the Exchange considers Market-
Makers' bulk message bids and offers when determining the Composite
Market in connection with the opening auction process. For that reason,
the price protection measures applied during the opening auction
process (the Maximum Composite Width check and the Opening Collar) are
based on the Composite Market. The Exchange believes it would be
beneficial, and may lead to more accurate pricing during the opening
auction process, for the Composite Market to be used for the RTH
opening auction process to incorporate all available bulk message bids
and offers from appointed Market-Makers, including any in the GTH book.
Therefore, the proposed rule change amends the definition of Composite
Market to provide that it will be comprised of the higher (lower) of
the then-current best appointed Market-Maker bulk message bid (offer)
on the Exchange (which includes both the RTH Queuing Book and the GTH
book), rather than just the Queuing Book.
Second, the proposed rule change amends Rule 21.7(e)(1) to provide
that a series is not eligible to open if the Composite Market is
crossed (i.e., the Composite Bid is higher than the Composite Offer). A
series will be eligible to open if the Composite Width is less than or
equal to the Maximum Composite Width, or is greater than the Maximum
Composite Width but there are no non-M Capacity market orders or buy
(sell) limit orders with prices higher (lower) than the Composite Bid
(Offer) and no orders or quotes marketable against each other (i.e.,
locked or crossed).\7\ The Maximum Composite Width Check is a price
protection measure intended to prevent orders from executing at extreme
prices at the open. A crossed market is generally unreliable, and
opening with a crossed Composite Market may create price risk for any
executions that may occur during the opening rotation (pursuant to
subparagraph (e)(3)). Therefore, the proposed rule change enhances the
Maximum Composite Width check price protection to provide that the
Composite Market may not be crossed for a series to be eligible to
open.
---------------------------------------------------------------------------
\7\ The proposed rule change makes a nonsubstantive change to
this language in Rule 21.7(e)(1)(B). Once a series satisfies the
conditions in the Maximum Composite Width Check, the System will
determine an Opening Trading Price pursuant to Rule 21.7(e)(2), and
then open the series pursuant to Rule 21.7(e)(3).
---------------------------------------------------------------------------
Third, the proposed rule change harmonizes how the opening auction
process will be used following all trading halts. Current Rule 21.7(g)
provides that if there is a Regulatory Halt,\8\ the Queuing Period
begins immediately when the Exchange halts trading in the class. If the
Exchange declares any other type of halt in a class (i.e., a non-
Regulatory Halt), there will be no Queuing Period. Additionally, if
there is a Regulatory Halt, the System queues a User's open orders or
quotes, unless the User entered instructions to cancel its open resting
orders and quotes, but if there is a non-Regulatory Halt, the System
cancels a User's open orders and quotes. The Exchange has determined to
eliminate the distinction between how the opening auction process
applies following a Regulatory Halt and a non-Regulatory Halt. The
proposed rule change provides that the opening auction process
following any trading halt will apply in the manner it currently
applies following a Regulatory Halt. In other words, following a non-
Regulatory Halt, there will be a Queuing Period during the trading
halt. Additionally, in the event of a non-Regulatory Halt, the System
will queue a User's orders and quotes resting on the book at the time
of the trading halt for participation in the opening rotation following
the trading halt, unless the User entered instructions to cancels its
resting orders and quotes. This will provide Users with the ability to
decide how its resting orders and quotes should be handled in the event
of a non-Regulatory Halt, as they are currently able to do in the event
of a Regulatory Halt. The Exchange also believes elimination of this
distinction will eliminate potential investor confusion regarding how
the System will handle orders and quotes in the event of a trading
halt.\9\
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\8\ If the primary market for the applicable underlying security
declares a regulatory trading halt, suspension, or pause with
respect to such security, it is referred to as a ``Regulatory
Halt.''
\9\ The proposed rule change also makes nonsubstantive changes
to paragraph (g).
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Finally, the proposed rule change makes several nonsubstantive
changes in Rule 21.7:
The proposed rule change makes a grammatical change in
subparagraph (b)(2).
The proposed rule change adds the word ``process'' in
subparagraph (b)(2)(E) after the term ``opening auction,'' as it was
inadvertently omitted (throughout Rule 21.7, the entire opening is
referred to as the ``opening auction process'').
The proposed rule change updates subparagraph (e)(2) to clarify
when the System will and will not be able to determine an Opening Trade
Price. The System determines an Opening Trade Price if there are orders
and quotes marketable against each other at a price not outside the
Opening Collar (this is consistent with the current rule, which states
there is no Opening Trade Price if there are no locked or crossed
orders or quotes (i.e., marketable orders and quotes) at a price not
outside the Opening Collar). The proposed rule change merely modifies
the language, which the Exchange believes is clearer, and makes
corresponding changes to the paragraph numbering and lettering.
Additionally, the proposed rule change adds the defined term ``VMIM
price'', which is the price determined by the process described in
current subparagraphs (e)(2)(A)(i) through (iii) (proposed
subparagraphs (e)(2)(A) through (3)). The proposed rule change does not
modify the process used to determine that price.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\10\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \11\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and 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. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \12\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
\12\ Id.
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In particular, the proposed revision to the definition of Composite
Market will remove impediments to and perfect the mechanism of a free
and open market and a national market system and protect investors,
because it will ensure the price protection measures used during the
opening auction process, which are based on the Composite Market, for
the RTH opening in an All Sessions Class will incorporate all available
pricing information on the Exchange from appointed Market-
[[Page 26494]]
Makers in that class. The Exchange believes this may lead to a more
accurate Opening Trade Price. The proposed rule change to not open a
series if the Composite Market is crossed will promote just and
equitable principles of trade and protect investors, because crossed
markets are generally unreliable. The Exchange believes not opening a
series if the Composite Market is crossed may reduce the risk of
erroneously priced executions during the opening rotation. The proposed
rule change to harmonize the opening auction process following all
types of trading halts will protect investors by eliminating potential
confusion regarding how the Exchange will open series following trading
halts, and by providing Users with flexibility regarding how the System
will handle their orders and quotes following a non-Regulatory Halt (as
they currently have following a Regulatory Halt). The proposed
nonsubstantive changes will benefit investors by providing additional
clarity to the Rules.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed rule change
will not impose any burden on intramarket competition that is not
necessary or appropriate in furtherance of the purposes of the Act. The
proposed changes to the price protection measures used during the
opening auction process will apply in the same manner to all orders and
quotes of all Users. All Users will have the same flexibility regarding
how the System will handle their orders and quotes following non-
Regulatory Halts, which is the same flexibility currently available to
Users following Regulatory Halts. If a User wants its orders and quotes
to be handled following a non-Regulatory Halt in the manner they are
today, that User can instruct the Exchange to do so. The proposed rule
change will not impose any burden on intermarket competition that is
not necessary or appropriate in furtherance of the purposes of the Act.
The proposed changes to the price protections used during the opening
auction process only impact how series will open on the Exchange prior
to the opening of trading. The proposed changes are intended to enhance
the price protections used during the opening process and are not
intended as competitive changes, and to provide Users with flexibility
with respect to the handling of their orders and quotes following a
non-Regulatory Halt. The proposed nonsubstantive changes do not impact
trading, and thus have no competitive impact; they merely provide
additional clarity to the Rules.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received 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 \13\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\14\
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\13\ 15 U.S.C. 78s(b)(3)(A)(iii).
\14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change 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-CboeEDGX-2019-033 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-CboeEDGX-2019-033. 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-CboeEDGX-2019-033 and should be
submitted on or before June 27, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-11797 Filed 6-5-19; 8:45 am]
BILLING CODE 8011-01-P