Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating To Adopt Limit-on-Close (“LOC”) and Market-on-Close (“MOC”) Orders, 27169-27172 [2019-12192]
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Federal Register / Vol. 84, No. 112 / Tuesday, June 11, 2019 / Notices
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of these reasons, the Commission
believes the Framework would, in
general, protect investors and the public
interest.
Therefore, the Commission finds that
the proposed rule change would
promote the prompt and accurate
clearance and settlement of securities
transactions, assure the safeguarding of
securities and funds in ICC’s custody
and control, and, in general, protect
investors and the public interest,
consistent with the Section 17A(b)(3)(F)
of the Act.14
B. Consistency With Rules 17Ad–
22(b)(2) and 17Ad–22(b)(3)
Rule 17Ad–22(b)(2) requires that ICC
establish, implement, maintain and
enforce written policies and procedures
reasonably designed to use margin
requirements to limit its credit
exposures to participants under normal
market conditions and use risk-based
models and parameters to set margin
requirements and review such margin
requirements and the related risk-based
models and parameters at least
monthly.15 Rule 17Ad–22(b)(3) requires
that ICC establish, implement, maintain
and enforce written policies and
procedures reasonably designed to
maintain sufficient financial resources
to withstand, at a minimum, a default
by the two participant families to which
it has the largest exposures in extreme
but plausible market conditions, in its
capacity as a central counterparty for
security-based swaps.16
As described above, the proposed rule
change would enhance the operation of
the Framework. In doing so, the
Commission believes that the proposed
rule change would help ensure that
ICC’s risk management system is
appropriate and effective for dealing
with the risks associated with clearing
security based swap-related portfolios.
The Commission further believes that
the proposed improvements to the
Framework would also improve ICC’s
review and maintenance of the models
that generate margin requirements. The
Commission believes that the proposed
rule change would therefore improve
ICC’s use of initial margin requirements
to limit its credit exposures to
participants under normal market
conditions and ICC’s use of risk-based
models and parameters to set margin
requirements. The Commission
therefore finds that the proposed rule
change is consistent with Rule 17Ad–
22(b)(2).17
Moreover, the amount a clearing
member must contribute to ICC’s
Guaranty Fund is equal to the expected
losses to ICC associated with the default
of that clearing member, calculated
using ICC’s stress test methodology, and
taking into account, among other things,
the loss after application of initial
margin.18 Thus, ICC’s guaranty fund is
based on the initial margin
requirements. The Commission
therefore believes that, in improving the
operation of the Framework, which
would in turn improve the operation of
ICC’s margin model and margin
requirements, the proposed rule change
would also help ICC to maintain
sufficient financial resources to
withstand, at a minimum, a default by
the two participant families to which it
has the largest exposures in extreme but
plausible market conditions. The
Commission therefore finds that the
proposed rule change is consistent with
Rule 17Ad–22(b)(3).19
Therefore, for the above reasons the
Commission finds that the proposed
rule change is consistent with Rules
17Ad–22(b)(2) and 17Ad–22(b)(3).20
C. Consistency With Rule 17Ad–22(b)(4)
Rule 17Ad–22(b)(4) requires that ICC
establish, implement, maintain and
enforce written policies and procedures
reasonably designed to provide for an
annual model validation consisting of
evaluating the performance of its margin
models and the related parameters and
assumptions associated with such
models by a qualified person who is free
from influence from the persons
responsible for the development or
operation of the models being
validated.21
As discussed above, the proposed rule
change would revise the Framework to
specify that independent validators
perform periodic reviews of Model
Components and related practices at
least every twelve months and that ICC
relies on the date of the engagement
letter to track this twelve month
requirement. The Commission believes
that the proposed rule change would
therefore help to ensure that all Model
Components and related practices are
reviewed annually by providing a
uniform and objective means of tracking
the date of the validation through the
date of the engagement letter. Therefore,
the Commission finds that the proposed
rule change is consistent with Rule
17Ad–22(b)(4).22
18 See
ICC Rule 801(a).
CFR 240.17Ad–22(b)(3).
20 17 CFR 240.17Ad–22(b)(2), (b)(3).
21 17 CFR 240.17Ad–22(b)(4).
22 17 CFR 240.17Ad–22(b)(4).
14 15
U.S.C. 78q–1(b)(3)(F).
15 17 CFR 240.17Ad–22(b)(2).
16 17 CFR 240.17Ad–22(b)(3).
17 17 CFR 240.17Ad–22(b)(2).
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27169
IV. Conclusion
On the basis of the foregoing, the
Commission finds that the proposed
rule change is consistent with the
requirements of the Act, and in
particular, with the requirements of
Section 17A(b)(3)(F) of the Act 23 and
Rules 17Ad–22(b)(2), 17Ad–22(b)(3),
and 17Ad–22(b)(4) thereunder.24
It is therefore ordered pursuant to
Section 19(b)(2) of the Act 25 that the
proposed rule change (SR–ICC–2019–
004) be, and hereby is, approved.26
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–12193 Filed 6–10–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86038; File No. SR–C2–
2019–013]
Self-Regulatory Organizations; Cboe
C2 Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating To Adopt Limiton-Close (‘‘LOC’’) and Market-on-Close
(‘‘MOC’’) Orders
June 5, 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 29,
2019, Cboe C2 Exchange, Inc. (the
‘‘Exchange’’ or ‘‘C2’’) 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.
23 15
U.S.C. 78q–1(b)(3)(F).
CFR 240.17Ad–22(b)(2)–(4).
25 15 U.S.C. 78s(b)(2).
26 In approving the proposed rule change, the
Commission considered the proposal’s impact on
efficiency, competition, and capital formation.
15 U.S.C. 78c(f).
27 17 CFR 200.30–3(a)(12).
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).
24 17
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Federal Register / Vol. 84, No. 112 / Tuesday, June 11, 2019 / Notices
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe C2 Exchange, Inc. (the
‘‘Exchange’’ or ‘‘C2’’) proposes to adopt
limit-on-close (‘‘LOC’’) and market-onclose (‘‘MOC’’) orders. 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/ctwo/),
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
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1. Purpose
In 2016, the Exchange’s parent
company, Cboe Global Markets, Inc.
(‘‘Cboe Global’’), also the parent
company of Cboe Exchange, Inc. (‘‘Cboe
Options’’), acquired Cboe EDGX
Exchange, Inc. (‘‘EDGX or EDGX
Options’’), Cboe EDGA Exchange, Inc.
(‘‘EDGA’’), Cboe BZX Exchange, Inc.
(‘‘BZX or BZX Options’’), and Cboe BYX
Exchange, Inc. (‘‘BYX’’ and, together
with Cboe Options, the Exchange,
EDGX, EDGA, and BZX, the ‘‘Cboe
Affiliated Exchanges’’). The Cboe
Affiliated Exchanges are working to
align certain system functionality,
retaining only intended differences
between the Cboe Affiliated Exchanges,
in the context of a technology migration.
Cboe Options intends to migrate its
technology to the same trading platform
used by the Exchange, EDGX Options,
and BZX Options in the fourth quarter
of 2019. The proposal set forth below is
intended to add certain functionality to
the Exchange’s System that is available
on Cboe Options in order to ultimately
provide a consistent technology offering
for market participants who interact
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with the Cboe Affiliated Exchanges.5
Although the Exchange intentionally
offers certain features that differ from
those offered by its affiliates and will
continue to do so, the Exchange believes
that offering similar functionality to the
extent practicable will reduce potential
confusion for Users.
The Exchange proposes to adopt LOC
and MOC orders. The proposed
amendments to Rule 6.10(d) define an
LOC order as a limit order, and an MOC
order as a market order, respectively,
that may only execute on the Exchange
no earlier than three minutes prior to
Regular Trading Hours (‘‘RTH’’) market
close. The System enters LOC and MOC
orders into the Book in time sequence
(based on the times at which the
Exchange initially received them),
where they may be processed in
accordance with Rule 6.12.6 The
Exchange notes that it does not have a
closing auction in which market
participants may participate in an
auction rotation that determines the
closing price for a series, like that of the
equities space, but that the proposed
MOC and LOC orders merely become
executable three minutes prior to the
close of RTH. The Exchange queues
LOC and MOC orders in the System
until three minutes before the RTH
market close. At that time, the System
handles a LOC or MOC order as a limit
order or market order, as applicable, and
processes them in accordance with Rule
6.12. The Exchange believes that three
minutes prior to the RTH market close
is a reasonable time prior to the market
close to trigger MOC and LOC orders, as
it provides those orders with sufficient
time to interact with contra-side interest
and potentially execute at a time close
to the RTH market close.7 The proposed
LOC and MOC order definitions also
provide that the System cancels an LOC
order or an MOC order (or an
unexecuted portion of an LOC or MOC
order) that does not execute by the RTH
market close. This is consistent with the
purpose of these orders, which is to
execute near the RTH market close on
the day they were submitted to the
Exchange. As the execution of MOC and
LOC orders is linked to the RTH market
close, such orders will be valid only
during RTH; however, the System will
accept such orders during any trading
5 The Exchange also notes that its affiliated
exchanges, BZX Options and EDGX Options, are
simultaneously proposing to make similar changes
in order to align functionality with Cboe Options.
6 Rule 6.12 describes how the System processes
orders and quotes in the Book.
7 The Exchange notes that Cboe Options currently
triggers the MOC and LOC orders three minutes
prior to the RTH market close.
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session.8 A User may not designate an
MOC or LOC order as ‘‘All Sessions’’; 9
any MOC or LOC order designated as
All Sessions will be rejected. In addition
to this, the Exchange notes that Users
may not designate bulk messages as
MOC or LOC, which is consistent with
the current requirement that bulk
messages must have a time-in-force of
Day to encourage Users to provide
liquidity to the Exchange’s market
throughout the trading day and update
bulk messages in response to changed
market conditions day-to-day.10 The
proposed order types are based on
substantially similar order types
available on Cboe Options.11 MOC and
LOC orders allow a User to execute
orders in a series close to the close time.
The Exchange also proposes to add
subparagraph (C) to Rule 6.12(c)(5) to
include additional order handling
regarding MOC orders during a limit uplimit down state.12 The proposed
change provides that if the underlying
security is in a limit up-limit down state
three minutes prior to the RTH market
close a MOC order will not be elected,
and that if the underlying security exits
the limit up-limit down state prior to
8 The Exchange notes that an RTH Only MOC or
LOC order submitted during Global Trading Hours
(‘‘GTH’’) will remain on the book until the close of
RTH.
9 See Rule 6.10(b) which defines ‘‘All Sessions’’
as an order a User designates as eligible to trade
during both Global Trading Hours (‘‘GTH’’) and
RTH. The Exchange also notes that Rule 6.10(b)
defines ‘‘RTH Only’’ as an order a User designates
as eligible to trade only during RTH or not
designated as All Sessions. Therefore, the default
instruction is RTH Only and an unmarked MOC or
LOC order will be treated as RTH Only. See also
Securities Exchange Act Release No. 85788 (May 6,
2019), 84 FR 20673 (May 10, 2019) (Notice of Filing
and Immediate Effectiveness of a Proposed Rule
Change To Amend the Exchange’s Opening Process
and Add a Global Trading Hours Session for DJX
Options) (SR–C2–2019–009).
10 See Rule 6.10(d), which defines time-in-force of
‘‘Day’’ as an order that, if not executed, expires at
the RTH market close. All bulk messages have a
Time-in-Force of Day. See also Securities Exchange
Act Release No. 85038 (February 2, [sic] 2019), 84
FR 2598 (February 7, 2019) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change
To Discontinue Bulk Order Functionality and
Implement Bulk Message Functionality) (SR–C2–
2018–025). Note Users may submit bulk messages
within three minutes of the RTH market close,
which would ultimately be handled in the same
manner as an LOC order.
11 See Cboe Options Rule 6.53, which defines a
‘‘market-on-close’’ order as a market or limit order
to be executed as close as possible to the close of
the market near to or at the closing price for the
particular option series. The Exchange notes that in
connection with migration, Cboe Options intends to
propose the same definitions of market- and limiton-close orders as proposed in this rule filing.
12 See Rule 6.39 which defines a ‘‘limit up-limit
down state’’ to mean the period of time when the
underlying security of an option enters a limit or
straddle state as defined in the Regulation NMS
Plan to Address Extraordinary Market Volatility
(the ‘‘Limit Up-Limit Down Plan’’ or the ‘‘Plan’’).
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Federal Register / Vol. 84, No. 112 / Tuesday, June 11, 2019 / Notices
the RTH market close, the System will
attempt to re-evaluate, elect, and
execute the order.13 The Exchange notes
that the proposed handling of MOC
orders in a limit up-limit down state is
consistent with the Regulation NMS
Plan to Address Extraordinary Market
Volatility (‘‘Limit Up-Limit Down
Plan’’) and is based on the
corresponding Cboe Options rule
regarding handling of MOC orders.14
The Exchange also proposes to add a
reference to MOC orders to Rule 6.39(a),
which lists the order types that will be
handled specially during a limit uplimit-down state, to reflect the proposed
change to Rule 6.12(c)(5).
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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.15 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 16 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) 17 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the Exchange believes
that the proposed adoption of MOC and
LOC orders serves to benefit investors
by allowing Users flexibility to have
orders only be eligible for execution
near the close, a time in which
maximum significant number of
participants interact on the Exchange.
The Exchange believes that the
proposed change promotes just and
equitable principles of trade because it
13 The Exchange also amends the heading to
subparagraph (c)(5) to reflect the addition of MOC
order handling during a limit up-limit down state.
The Exchange notes that during a limit up-limit
down state limit orders are not impacted and
continue to be eligible for execution.
14 See Cboe Options Rule 6.45(d)(2).
15 15 U.S.C. 78f(b).
16 15 U.S.C. 78f(b)(5).
17 Id.
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encourages increased participation near
the close, thereby contributing to
enhanced price discovery and
transparency that will result in a closing
price point that more closely reflects the
interest of market participants. The
Exchange also believes that the
proposed change will benefit investors
by fostering increased liquidity near the
close. As stated, the proposed change is
based on Cboe Options rules.18
Furthermore, the Exchange believes
specifying that the MOC and LOC may
execute no more than three minutes
from the RTH close removes
impediments to and perfects the
mechanism of a free and open market
and national market system and protects
investors because it will allow Users
greater flexibility regarding the
execution of their orders and/or their
customers’ orders. The Exchange
believes this three minute time-frame
prior to the RTH market close is a
reasonable time prior to the market
close to trigger MOC and LOC orders,
because it provides those orders with
sufficient times to interact with contraside interest and to potentially execute
at a time close to RTH market close.
The Exchange also believes not
permitting bulk messages to be MOC
and LOC orders will remove
impediments to and perfect the
mechanism of a free and open market
and protect investors because it is
consistent with the purpose of bulk
messages. As stated, bulk messages are
currently restricted to designation as
time-in-force of Day in order to
encourage Users to provide liquidity to
the Exchange’s market during RTH and
update bulk messages in response to
day-to-day changed market
conditions.19 Because MOC and LOC
orders are only available for execution
for three minutes prior to the RTH
market close, as opposed to during the
entire RTH session, Exchange believes
that not permitting bulk messages to be
MOC or LOC orders ensures that
functionality available to Users is
consistent with the purpose of bulk
messages.
Moreover, the Exchange also believes
that rejecting MOC and LOC orders if
designated as ‘‘All Sessions’’ serves to
remove impediments to and perfect the
mechanism of a free and open market
and protect investors by providing
functionality that is consistent with the
purpose of MOC and LOC orders. As
described above, because MOC and LOC
orders are linked to the RTH close,
allowing MOC or LOC orders to be
marked for All Sessions (i.e., RTH and
GTH) would be inconsistent with the
function of MOC and LOC orders.
Therefore, the Exchange believes that
not permitting MOC and LOC orders to
be marked as All Sessions will protect
investors by ensuring instructions for
MOC and LOC orders are consistent
with their purpose.
Additionally, the Exchange believes
that the proposed additional order
handling for MOC during a limit uplimit down state protects investors
because it is consistent with the Limit
Up-Limit Down Plan and prevents a
market order from executing outside of
the specified price bands. This order
handling is consistent with that of Cboe
Options rules.20
Lastly, the Exchange notes that the
proposed rule change is generally
intended to align the functionality
offered by the Exchange with
functionality currently offered by Cboe
Options in order to provide a consistent
technology offering for the Cboe
Affiliated Exchanges.21 A consistent
technology offering, in turn, will
simplify the technology
implementation, changes, and
maintenance by Users of the Exchange
that are also participants on Cboe
Affiliated Exchanges.22 The Exchange
believes this consistency will promote a
fair and orderly national options market
system. When Cboe Options migrates to
the same technology as that of the
Exchange and other Cboe Affiliated
Exchanges, Users of the Exchange and
other Cboe Affiliated Exchanges will
have access to similar functionality on
all Cboe Affiliated Exchanges. As such,
the proposed rule change would foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities and would
remove impediments to and perfect the
mechanism of a free and open market
and a national market system.
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
Exchange does not believe the proposed
rule change will impose any burden on
intramarket competition, as the
proposed rule change will apply in the
same manner to all orders submitted as
MOC or as LOC. MOC and LOC orders
will be available to all Users, and MOC
and LOC orders from all Users will be
handled in the same manner. The use of
20 See
18 See
supra note 11.
19 See supra note 10.
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21 See
supra note 14.
supra note 5.
22 Id.
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27171
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Federal Register / Vol. 84, No. 112 / Tuesday, June 11, 2019 / Notices
MOC and LOC orders will be voluntary.
The Exchange does not believe the
proposed rule change will impose any
burden on intermarket competition
because the proposed change is based
on rules that allow for substantially the
same order types that are available on
another options exchange.23
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 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 if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 24 and Rule 19b–4(f)(6)
thereunder.25
A proposed rule change filed under
Rule 19b–4(f)(6) 26 normally does not
become operative for 30 days after the
date of filing. However, pursuant to
Rule 19b–4(f)(6)(iii) 27 the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest.
The Exchange has asked the
Commission to waive the 30-day
operative delay. The Commission
believes that waiving the 30-day
operative delay is consistent with the
protection of investors and the public
interest as it will allow the Exchange to
offer two order types that are
substantially similar to order types that
are currently available on Cboe Options.
Thus, as represented by the Exchange,
the proposed rule change does not
introduce any new functionality or
present any novel issues. For this
reason, the Commission designates the
proposed rule change to be operative on
23 See
supra note 11.
U.S.C. 78s(b)(3)(A).
25 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 at least five business
days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
26 17 CFR 240.19b–4(f)(6).
27 17 CFR 240.19b–4(f)(6)(iii).
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24 15
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June 20, 2019, the day before the
Exchange would like to implement
MOC and LOC orders.28
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
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 rule-comments@
sec.gov. Please include File Number SR–
C2–2019–013 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–C2–2019–013. 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
28 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
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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–C2–2019–013 and should
be submitted on or before July 2, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.29
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–12192 Filed 6–10–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86037; File No. SR–DTC–
2018–010]
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Designation of a Longer Period for
Commission Action on Proceedings To
Determine Whether To Approve or
Disapprove a Proposed Rule Change
To Amend the Settlement Guide
Procedures To Provide Status
Information for Institutional
Transactions to a Matching Utility
June 5, 2019.
On November 29, 2018, The
Depository Trust Company (‘‘DTC’’),
filed with the Securities and Exchange
Commission (‘‘Commission’’) a
proposed rule change, pursuant to
Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 to allow DTC to
share status information with matching
utilities (SR–DTC–2018–010).
The proposed rule change was
published for comment in the Federal
Register on December 12, 2018.3 In
response, the Commission received one
comment letter on the proposed rule
change.4 On December 26, 2018, the
Commission extended the time period
within which to approve the proposed
rule change, disapprove the proposed
rule change, or institute proceedings to
29 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Securities Exchange Act Release No. 84751
(December 7, 2018), 83 FR 63948 (December 12,
2018) (SR–DTC–2018–010).
4 Letter from Mari-Anne Pisarri, Pickard Djinis
and Pisarri LLP, dated January 2, 2019, to Eduardo
A. Aleman, Assistant Secretary, Commission,
available at https://www.sec.gov/comments/sr-dtc2018-010/srdtc2018010-4842066-177179.pdf
(‘‘SS&C Letter I’’).
1 15
E:\FR\FM\11JNN1.SGM
11JNN1
]]>Agencies
[Federal Register Volume 84, Number 112 (Tuesday, June 11, 2019)]
[Notices]
[Pages 27169-27172]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-12192]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86038; File No. SR-C2-2019-013]
Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Relating
To Adopt Limit-on-Close (``LOC'') and Market-on-Close (``MOC'') Orders
June 5, 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 29, 2019, Cboe C2 Exchange, Inc. (the ``Exchange'' or
``C2'') 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.
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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)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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[[Page 27170]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe C2 Exchange, Inc. (the ``Exchange'' or ``C2'') proposes to
adopt limit-on-close (``LOC'') and market-on-close (``MOC'') orders.
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/ctwo/), 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
In 2016, the Exchange's parent company, Cboe Global Markets, Inc.
(``Cboe Global''), also the parent company of Cboe Exchange, Inc.
(``Cboe Options''), acquired Cboe EDGX Exchange, Inc. (``EDGX or EDGX
Options''), Cboe EDGA Exchange, Inc. (``EDGA''), Cboe BZX Exchange,
Inc. (``BZX or BZX Options''), and Cboe BYX Exchange, Inc. (``BYX''
and, together with Cboe Options, the Exchange, EDGX, EDGA, and BZX, the
``Cboe Affiliated Exchanges''). The Cboe Affiliated Exchanges are
working to align certain system functionality, retaining only intended
differences between the Cboe Affiliated Exchanges, in the context of a
technology migration. Cboe Options intends to migrate its technology to
the same trading platform used by the Exchange, EDGX Options, and BZX
Options in the fourth quarter of 2019. The proposal set forth below is
intended to add certain functionality to the Exchange's System that is
available on Cboe Options in order to ultimately provide a consistent
technology offering for market participants who interact with the Cboe
Affiliated Exchanges.\5\ Although the Exchange intentionally offers
certain features that differ from those offered by its affiliates and
will continue to do so, the Exchange believes that offering similar
functionality to the extent practicable will reduce potential confusion
for Users.
---------------------------------------------------------------------------
\5\ The Exchange also notes that its affiliated exchanges, BZX
Options and EDGX Options, are simultaneously proposing to make
similar changes in order to align functionality with Cboe Options.
---------------------------------------------------------------------------
The Exchange proposes to adopt LOC and MOC orders. The proposed
amendments to Rule 6.10(d) define an LOC order as a limit order, and an
MOC order as a market order, respectively, that may only execute on the
Exchange no earlier than three minutes prior to Regular Trading Hours
(``RTH'') market close. The System enters LOC and MOC orders into the
Book in time sequence (based on the times at which the Exchange
initially received them), where they may be processed in accordance
with Rule 6.12.\6\ The Exchange notes that it does not have a closing
auction in which market participants may participate in an auction
rotation that determines the closing price for a series, like that of
the equities space, but that the proposed MOC and LOC orders merely
become executable three minutes prior to the close of RTH. The Exchange
queues LOC and MOC orders in the System until three minutes before the
RTH market close. At that time, the System handles a LOC or MOC order
as a limit order or market order, as applicable, and processes them in
accordance with Rule 6.12. The Exchange believes that three minutes
prior to the RTH market close is a reasonable time prior to the market
close to trigger MOC and LOC orders, as it provides those orders with
sufficient time to interact with contra-side interest and potentially
execute at a time close to the RTH market close.\7\ The proposed LOC
and MOC order definitions also provide that the System cancels an LOC
order or an MOC order (or an unexecuted portion of an LOC or MOC order)
that does not execute by the RTH market close. This is consistent with
the purpose of these orders, which is to execute near the RTH market
close on the day they were submitted to the Exchange. As the execution
of MOC and LOC orders is linked to the RTH market close, such orders
will be valid only during RTH; however, the System will accept such
orders during any trading session.\8\ A User may not designate an MOC
or LOC order as ``All Sessions''; \9\ any MOC or LOC order designated
as All Sessions will be rejected. In addition to this, the Exchange
notes that Users may not designate bulk messages as MOC or LOC, which
is consistent with the current requirement that bulk messages must have
a time-in-force of Day to encourage Users to provide liquidity to the
Exchange's market throughout the trading day and update bulk messages
in response to changed market conditions day-to-day.\10\ The proposed
order types are based on substantially similar order types available on
Cboe Options.\11\ MOC and LOC orders allow a User to execute orders in
a series close to the close time.
---------------------------------------------------------------------------
\6\ Rule 6.12 describes how the System processes orders and
quotes in the Book.
\7\ The Exchange notes that Cboe Options currently triggers the
MOC and LOC orders three minutes prior to the RTH market close.
\8\ The Exchange notes that an RTH Only MOC or LOC order
submitted during Global Trading Hours (``GTH'') will remain on the
book until the close of RTH.
\9\ See Rule 6.10(b) which defines ``All Sessions'' as an order
a User designates as eligible to trade during both Global Trading
Hours (``GTH'') and RTH. The Exchange also notes that Rule 6.10(b)
defines ``RTH Only'' as an order a User designates as eligible to
trade only during RTH or not designated as All Sessions. Therefore,
the default instruction is RTH Only and an unmarked MOC or LOC order
will be treated as RTH Only. See also Securities Exchange Act
Release No. 85788 (May 6, 2019), 84 FR 20673 (May 10, 2019) (Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend the Exchange's Opening Process and Add a Global Trading Hours
Session for DJX Options) (SR-C2-2019-009).
\10\ See Rule 6.10(d), which defines time-in-force of ``Day'' as
an order that, if not executed, expires at the RTH market close. All
bulk messages have a Time-in-Force of Day. See also Securities
Exchange Act Release No. 85038 (February 2, [sic] 2019), 84 FR 2598
(February 7, 2019) (Notice of Filing and Immediate Effectiveness of
a Proposed Rule Change To Discontinue Bulk Order Functionality and
Implement Bulk Message Functionality) (SR-C2-2018-025). Note Users
may submit bulk messages within three minutes of the RTH market
close, which would ultimately be handled in the same manner as an
LOC order.
\11\ See Cboe Options Rule 6.53, which defines a ``market-on-
close'' order as a market or limit order to be executed as close as
possible to the close of the market near to or at the closing price
for the particular option series. The Exchange notes that in
connection with migration, Cboe Options intends to propose the same
definitions of market- and limit-on-close orders as proposed in this
rule filing.
---------------------------------------------------------------------------
The Exchange also proposes to add subparagraph (C) to Rule
6.12(c)(5) to include additional order handling regarding MOC orders
during a limit up-limit down state.\12\ The proposed change provides
that if the underlying security is in a limit up-limit down state three
minutes prior to the RTH market close a MOC order will not be elected,
and that if the underlying security exits the limit up-limit down state
prior to
[[Page 27171]]
the RTH market close, the System will attempt to re-evaluate, elect,
and execute the order.\13\ The Exchange notes that the proposed
handling of MOC orders in a limit up-limit down state is consistent
with the Regulation NMS Plan to Address Extraordinary Market Volatility
(``Limit Up-Limit Down Plan'') and is based on the corresponding Cboe
Options rule regarding handling of MOC orders.\14\ The Exchange also
proposes to add a reference to MOC orders to Rule 6.39(a), which lists
the order types that will be handled specially during a limit up-limit-
down state, to reflect the proposed change to Rule 6.12(c)(5).
---------------------------------------------------------------------------
\12\ See Rule 6.39 which defines a ``limit up-limit down state''
to mean the period of time when the underlying security of an option
enters a limit or straddle state as defined in the Regulation NMS
Plan to Address Extraordinary Market Volatility (the ``Limit Up-
Limit Down Plan'' or the ``Plan'').
\13\ The Exchange also amends the heading to subparagraph (c)(5)
to reflect the addition of MOC order handling during a limit up-
limit down state. The Exchange notes that during a limit up-limit
down state limit orders are not impacted and continue to be eligible
for execution.
\14\ See Cboe Options Rule 6.45(d)(2).
---------------------------------------------------------------------------
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.\15\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \16\ 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) \17\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(5).
\17\ Id.
---------------------------------------------------------------------------
In particular, the Exchange believes that the proposed adoption of
MOC and LOC orders serves to benefit investors by allowing Users
flexibility to have orders only be eligible for execution near the
close, a time in which maximum significant number of participants
interact on the Exchange. The Exchange believes that the proposed
change promotes just and equitable principles of trade because it
encourages increased participation near the close, thereby contributing
to enhanced price discovery and transparency that will result in a
closing price point that more closely reflects the interest of market
participants. The Exchange also believes that the proposed change will
benefit investors by fostering increased liquidity near the close. As
stated, the proposed change is based on Cboe Options rules.\18\
---------------------------------------------------------------------------
\18\ See supra note 11.
---------------------------------------------------------------------------
Furthermore, the Exchange believes specifying that the MOC and LOC
may execute no more than three minutes from the RTH close removes
impediments to and perfects the mechanism of a free and open market and
national market system and protects investors because it will allow
Users greater flexibility regarding the execution of their orders and/
or their customers' orders. The Exchange believes this three minute
time-frame prior to the RTH market close is a reasonable time prior to
the market close to trigger MOC and LOC orders, because it provides
those orders with sufficient times to interact with contra-side
interest and to potentially execute at a time close to RTH market
close.
The Exchange also believes not permitting bulk messages to be MOC
and LOC orders will remove impediments to and perfect the mechanism of
a free and open market and protect investors because it is consistent
with the purpose of bulk messages. As stated, bulk messages are
currently restricted to designation as time-in-force of Day in order to
encourage Users to provide liquidity to the Exchange's market during
RTH and update bulk messages in response to day-to-day changed market
conditions.\19\ Because MOC and LOC orders are only available for
execution for three minutes prior to the RTH market close, as opposed
to during the entire RTH session, Exchange believes that not permitting
bulk messages to be MOC or LOC orders ensures that functionality
available to Users is consistent with the purpose of bulk messages.
---------------------------------------------------------------------------
\19\ See supra note 10.
---------------------------------------------------------------------------
Moreover, the Exchange also believes that rejecting MOC and LOC
orders if designated as ``All Sessions'' serves to remove impediments
to and perfect the mechanism of a free and open market and protect
investors by providing functionality that is consistent with the
purpose of MOC and LOC orders. As described above, because MOC and LOC
orders are linked to the RTH close, allowing MOC or LOC orders to be
marked for All Sessions (i.e., RTH and GTH) would be inconsistent with
the function of MOC and LOC orders. Therefore, the Exchange believes
that not permitting MOC and LOC orders to be marked as All Sessions
will protect investors by ensuring instructions for MOC and LOC orders
are consistent with their purpose.
Additionally, the Exchange believes that the proposed additional
order handling for MOC during a limit up-limit down state protects
investors because it is consistent with the Limit Up-Limit Down Plan
and prevents a market order from executing outside of the specified
price bands. This order handling is consistent with that of Cboe
Options rules.\20\
---------------------------------------------------------------------------
\20\ See supra note 14.
---------------------------------------------------------------------------
Lastly, the Exchange notes that the proposed rule change is
generally intended to align the functionality offered by the Exchange
with functionality currently offered by Cboe Options in order to
provide a consistent technology offering for the Cboe Affiliated
Exchanges.\21\ A consistent technology offering, in turn, will simplify
the technology implementation, changes, and maintenance by Users of the
Exchange that are also participants on Cboe Affiliated Exchanges.\22\
The Exchange believes this consistency will promote a fair and orderly
national options market system. When Cboe Options migrates to the same
technology as that of the Exchange and other Cboe Affiliated Exchanges,
Users of the Exchange and other Cboe Affiliated Exchanges will have
access to similar functionality on all Cboe Affiliated Exchanges. As
such, the proposed rule change would foster cooperation and
coordination with persons engaged in facilitating transactions in
securities and would remove impediments to and perfect the mechanism of
a free and open market and a national market system.
---------------------------------------------------------------------------
\21\ See supra note 5.
\22\ Id.
---------------------------------------------------------------------------
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 Exchange does not
believe the proposed rule change will impose any burden on intramarket
competition, as the proposed rule change will apply in the same manner
to all orders submitted as MOC or as LOC. MOC and LOC orders will be
available to all Users, and MOC and LOC orders from all Users will be
handled in the same manner. The use of
[[Page 27172]]
MOC and LOC orders will be voluntary. The Exchange does not believe the
proposed rule change will impose any burden on intermarket competition
because the proposed change is based on rules that allow for
substantially the same order types that are available on another
options exchange.\23\
---------------------------------------------------------------------------
\23\ See supra note 11.
---------------------------------------------------------------------------
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 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 if consistent with the protection of investors
and the public interest, the proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \24\ and Rule 19b-4(f)(6)
thereunder.\25\
---------------------------------------------------------------------------
\24\ 15 U.S.C. 78s(b)(3)(A).
\25\ 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 at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) \26\ normally
does not become operative for 30 days after the date of filing.
However, pursuant to Rule 19b-4(f)(6)(iii) \27\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest.
---------------------------------------------------------------------------
\26\ 17 CFR 240.19b-4(f)(6).
\27\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------
The Exchange has asked the Commission to waive the 30-day operative
delay. The Commission believes that waiving the 30-day operative delay
is consistent with the protection of investors and the public interest
as it will allow the Exchange to offer two order types that are
substantially similar to order types that are currently available on
Cboe Options. Thus, as represented by the Exchange, the proposed rule
change does not introduce any new functionality or present any novel
issues. For this reason, the Commission designates the proposed rule
change to be operative on June 20, 2019, the day before the Exchange
would like to implement MOC and LOC orders.\28\
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\28\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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-C2-2019-013 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-C2-2019-013. 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-C2-2019-013 and should be submitted on
or before July 2, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\29\
---------------------------------------------------------------------------
\29\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-12192 Filed 6-10-19; 8:45 am]
BILLING CODE 8011-01-P
