Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating To Amend the Fat Finger Check for Simple Orders in Rule 6.14, 27675-27678 [2019-12451]
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Federal Register / Vol. 84, No. 114 / Thursday, June 13, 2019 / Notices
participants in order to generate profit,
it is the Exchange’s understanding from
SIFMA and clearing firms that the
current process can create significant
risk when the clearing firm can be given
up on any market participant’s
transaction, even where there is no prior
customer relationship or authorization
for that designated transaction.
In the absence of a mechanism that
governs a market participant’s use of a
Clearing Member’s services, the
Exchange’s proposal may indirectly
facilitate the ability of a Clearing
Member to manage their existing
customer relationships while continuing
to allow market participant choice in
broker execution services. While
Clearing Members may compete with
executing brokers for order flow, the
Exchange does not believe this proposal
imposes an undue burden on
competition. Rather, the Exchange
believes that the proposed rule change
balances the need for Clearing Members
to manage risks and allows them to
address outlier behavior from executing
brokers while still allowing freedom of
choice to select an executing broker.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
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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 14 and
subparagraph (f)(6) of Rule 19b–4
thereunder.15
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
14 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
15 17
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the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Eduardo A. Aleman,
Deputy Secretary.
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:
[FR Doc. 2019–12448 Filed 6–12–19; 8:45 am]
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
GEMX–2019–06 on the subject line.
Self-Regulatory Organizations; Cboe
C2 Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating To Amend the
Fat Finger Check for Simple Orders in
Rule 6.14
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–GEMX–2019–06. 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–GEMX–2019–06 and
should be submitted on or before July 5,
2019.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 6,
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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BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86066; File No. SR–C2–
2019–015]
June 7, 2019.
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 amend
the fat finger check for with respect to
simple orders in Rule 6.14. The text of
the proposed rule change is provided
below.
(additions are italicized; deletions are
[bracketed])
*
*
*
*
*
Rules of Cboe C2 Exchange, Inc.
*
*
*
*
*
Rule 6.14. Order and Quote Price Protection
Mechanisms and Risk Controls
(a)–(b) No change.
(c) All Orders.
(1) Limit Order Fat Finger Check. If a User
submits a buy (sell) limit order to the System
with a price that is more than a buffer
16 17
CFR 200.30–3(a)(12).
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).
1 15
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amount above (below) the NBO (NBB) for
simple orders or the SNBO (SNBB) for
complex orders, the System cancels or rejects
the order. The Exchange determines a default
buffer amount; however, a User may establish
a higher or lower amount than the Exchange
default.
(A) For simple buy (sell) orders, the
Exchange may determine to apply this check
on a class-by-class basis and not apply it to
limit orders entered prior to the conclusion
of the RTH [O]opening auction [P]process. If
the check applies prior to the conclusion of
the RTH [O]opening auction [P]process, it
uses [the midpoint of the prior trading day’s
closing NBBO (prior to 9:30 a.m.) or](i) the
last disseminated NBBO on that trading day,
or (ii) the midpoint of the prior trading day’s
closing NBBO, if no NBBO has been
disseminated on that trading day[(if there is
one, after 9:30 a.m.)]. The Exchange or User,
as applicable, may establish a different
default amount prior to the conclusion of the
RTH [O]opening auction [P]process than it
does after trading is open. If the check
applies prior to the conclusion of the O]RTH
opening auction [P]process, it does not apply
(i) if there is a corporate action impacting the
corporate stock price, (ii) if there is no NBBO
from the prior trading day, (iii) to orders with
origin code M or N, or (iv) to GTC and GTD
orders that reenter the Book from the prior
trading session [day].
*
*
*
*
*
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.
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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 amends the
fat finger check with respect to simple
orders in Rule 6.14. Current Rule
6.14(c)(1) states if a User submits a buy
(sell) limit order to the System with a
price that is more than a buffer amount
above (below) the national best offer
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(‘‘NBO’’) (national best bid (‘‘NBB’’)) for
simple orders, the System cancels or
rejects the order.5 Under current Rule
6.14(c)(1)(A) for simple orders, the
Exchange may determine to apply this
check on a class-by-class basis and not
apply it to limit orders entered prior to
the conclusion of the opening auction
process. If the check applies prior to the
conclusion of the opening auction
process, it uses the midpoint of the prior
trading day’s closing NBBO (prior to
9:30 a.m.) or the last disseminated
NBBO (if there is one, after 9:30 a.m.).6
The Exchange recently adopted a
global trading hours (‘‘GTH’’) trading
session, which will occur from 8:30 to
9:15 a.m. Eastern Time, which the
Exchange intends to implement on June
17, 2019.7 For classes that trade during
the GTH trading session, there may be
an NBBO disseminated prior to 9:30
a.m., as well as a GTH opening auction
process. Therefore, the Exchange
proposes to update the fat finger check
for simple orders to reflect a GTH
trading session. Because the GTH and
regular trading hours (‘‘RTH’’) trading
sessions will each have an opening
auction process,8 the Exchange now
proposes to amend Rule 6.14(c)(1)(A) to
specify that if the check applies prior to
the conclusion of the RTH opening
auction process (therefore, from the
beginning of the GTH opening process 9
through the RTH opening process), it
uses the last disseminated NBBO during
that trading day (which accounts for
NBBOs disseminated during GTH),10 or
5 The Exchange determines a default buffer
amount; however, a User may establish a higher or
lower amount than the Exchange default.
6 Current Rule 6.14(c)(1)(A) also states that the
Exchange or User, as applicable, may establish a
different default amount prior to the conclusion of
the opening auction process than it does after
trading is open. If the check applies prior to the
conclusion of the Opening Process, it does not
apply (i) if there is a corporate action impacting the
corporate stock price, (ii) if there is no NBBO from
the prior trading day, (iii) to orders with origin code
M (Market-Maker) or N (away market-maker), or (iv)
to good-til-cancelled (‘‘GTC’’) or good-til-day
(‘‘GTD’’) orders that reenter the Book from the prior
trading day.
7 See 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).
8 See Rule 6.11 which provides for the opening
auction processes for GTH and RTH.
9 The Exchange notes this includes the queuing
period as defined under Rule 6.11 which provides
for the opening auction process.
10 See Rule 1.1 which states that a trading day
includes both trading sessions on that day. The
Exchange also notes that it is amending the term
‘‘orders’’ to state ‘‘buy (sell) orders’’ in Rule
6.14(c)(1)(A) to mirror the same language used in
Rule 6.14(c)(1), as well as the term ‘‘Opening
Process’’ to ‘‘opening auction process’’ which is
consistent with the verbiage used throughout Rule
6.11 (Opening Auction Process).
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the midpoint of the prior trading day’s
closing NBBO, if no NBBO has been
disseminated during that trading day.
The Exchange notes that it is deleting
the language that refers to using the
prior trading day’s closing NBBO if the
check applies prior to 9:30 a.m., as well
as language that refers to an NBBO after
9:30 a.m., to accommodate the new GTH
session. For example, if it is 9:25 a.m.
the check would use the last
disseminated NBBO from the GTH
session (i.e., on that trading day), and,
if no NBBO has been disseminated on
that trading day then the System would
pull the midpoint of the prior trading
day’s closing NBBO, as it currently does
today. It also proposes to amend Rule
6.14(c)(1)(A) to state that if the check
applies prior to the conclusion of the
RTH opening auction process, it does
not apply to good-til-cancelled (‘‘GTC’’)
and good-til-date (‘‘GTD’’) orders that
reenter the Book from the prior trading
session. This proposed change accounts
for a prior trading session instead of the
trading day because the Exchange will
use the same Book for all trading
sessions, and thus any GTC or GTD
orders that do not trade during GTH
may become eligible for trading during
RTH.
The Exchange notes that the proposed
change is substantially similar to the
current rule, and merely proposes to
update language in connection with the
implementation of the GTH trading
session, specifying to which opening
auction process the check under Rule
6.14(c)(1)(A) will apply, and accounting
for the fact that there may be an NBBO
disseminated prior to 9:30 a.m. for
classes that will trade during the GTH
trading session.
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.11 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 12 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
11 15
12 15
E:\FR\FM\13JNN1.SGM
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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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) 13 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 by updating the fat finger check for
simple orders to account for the recently
adopted GTH trading session, the
proposed rule change serves to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system. As
described above, the proposed change is
substantially similar to the way in
which the current fat finger check for
simple orders functions, and merely
accounts for the fact that there will be
two trading sessions on the Exchange,
each with an opening auction process
and one of which will occur, and may
disseminate an NBBO, before 9:30 a.m.
Therefore, the Exchange believes that by
amending rule language to specify that
the fat finger check under Rule
6.14(c)(1)(A) will apply prior to the
conclusion of the RTH opening auction
process and by updating language to
reflect the earlier GTH session time and
potential NBBO dissemination during
that session in connection with the fat
finger check, it will remove
impediments to and perfect the
mechanism of a free and open market,
thereby protecting investors, by
increasing transparency of the
Exchange’s fat finger price protection
mechanism as it relates to the earlier
GTH trading session.
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 is not intended to
address competitive issues, but rather to
update a current price protection
mechanism in connection with the
addition of a GTH trading session. The
Exchange does not believe that the
proposed rule change to update the fat
finger check as it relates to the GTH
trading session will impose any burden
on intramarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act because it
will apply in the same manner to all
Users’ limit orders prior to the
conclusion of the RTH opening auction
process. The Exchange notes that a User
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may choose to establish a different
default amount prior to the conclusion
of the RTH opening auction process.
Furthermore, the Exchange does not
believe that the proposed change will
impose any burden on intermarket
competition that that is not necessary or
appropriate in furtherance of the
purposes of the Act because the
proposed change merely updates a price
protection mechanism already in place
on the Exchange and applicable only to
trading on the Exchange.
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
The Exchange has designated this rule
filing as non-controversial under
Section 19(b)(3)(A) 14 of the Act and
Rule 19b–4(f)(6) 15 thereunder. 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, it has
become effective pursuant to Section
19(b)(3)(A) of the Act and Rule 19b–
4(f)(6) thereunder.
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 16 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 17
permits the Commission to 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 Exchange believes
that waiver of the operative delay is
consistent with the protection of
investors and the public interest
because it is substantially similar to the
way in which the current fat finger
check for simple orders functions, and
merely accounts for the fact that there
will be two trading sessions on the
Exchange (each with an opening auction
process and one of which will occur,
and may disseminate an NBBO, before
9:30 a.m.), and does not raise any new
or novel issues. For this reason, the
14 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
16 17 CFR 240.19b–4(f)(6).
17 17 CFR 240.19b–4(f)(6)(iii).
15 17
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27677
Commission believes that waiver of the
30-day operative delay is consistent
with the protection of investors and the
public interest. Therefore, the
Commission hereby waives the
operative delay and designates the
proposal as operative upon filing.18
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 shall 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 rule-comments@
sec.gov. Please include File Number SR–
C2–2019–015 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–C2–2019–015. 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
18 For purposes only of waiving the 30-day
operative delay, the Commission also has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
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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–C2–2019–015 and should
be submitted on or before July 5, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–12451 Filed 6–12–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86064; File No. SR–MRX–
2019–10]
Self-Regulatory Organizations; Nasdaq
MRX, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Its Rules
Governing the Give Up of a Clearing
Member by a Member on Exchange
Transactions
June 7, 2019.
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Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on May 24,
2019, Nasdaq MRX, LLC (‘‘MRX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to a proposal
to amend its rules governing the give up
19 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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of a Clearing Member 3 by a Member on
Exchange transactions.
The text of the proposed rule change
is available on the Exchange’s website at
https://nasdaqmrx.cchwallstreet.com/, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
requirements in Rule 707 related to the
give up of a Clearing Member by a
Member on Exchange transactions. This
proposed rule change is substantially
similar 4 to a recently-approved rule
change by the Exchange’s affiliate,
Nasdaq PHLX LLC (‘‘Phlx’’),5 and serves
to align the rules of Phlx and the
Exchange.6
By way of background, to enter
transactions on the Exchange, a Member
must either be a Clearing Member or
must have a Clearing Member agree to
accept financial responsibility for all of
its transactions. In particular, Rule 707
currently provides that a Member must
give up the name of the Clearing
Member through whom the transaction
will be cleared. Rule 712(b) provides, in
3 The term ‘‘Clearing Member’’ means a Member
that is self-clearing or an Electronic Access Member
that clears Exchange Transactions for other
Members of the Exchange. See Rule 100(a)(11).
4 Specifically, MRX is not adopting sections (c)(i)
and (c)(ii) of Phlx Rule 1037, which relate to how
the Phlx trading system will enforce unauthorized
Give Ups for floor trades and electronic trades,
respectively. With respect to electronic trades, Phlx
will block the order from the outset whereas MRX
will automatically default to the Member’s
guarantor. See proposed MRX Rule 707(c).
5 See Securities Exchange Act Release No. 85136
(February 14, 2019) (SR–Phlx–2018–72) (Approval
Order).
6 The other Nasdaq, Inc.-owned options markets,
Nasdaq BX, Nasdaq ISE, Nasdaq GEMX, and The
Nasdaq Options Market (collectively, ‘‘Nasdaq
HoldCo Exchanges’’), will file similar rule change
proposals based on the Phlx filing.
PO 00000
Frm 00100
Fmt 4703
Sfmt 4703
relevant part, that every Clearing
Member shall be responsible for the
clearance of Exchange transactions of
such Clearing Member and of each
Member who gives up such Clearing
Member’s name pursuant to a letter of
authorization, letter of guarantee or
other authorization given by such
Clearing Member to such Member,
which authorization must be submitted
to the Exchange. Additionally Rule
808(a) provides that no Market Maker
(i.e., Primary Market Makers and
Competitive Market Makers) shall make
any transactions on the Exchange unless
a Letter of Guarantee has been issued for
such Member by a Clearing Member and
filed with the Exchange.7
Recently, certain Clearing Members,
in conjunction with the Securities
Industry and Financial Markets
Association (‘‘SIFMA’’), expressed
concerns related to the process by
which executing brokers on U.S. options
exchanges (‘‘Exchanges’’) are allowed to
designate or ‘give up’ a clearing firm for
purposes of clearing particular
transactions. The SIFMA-affiliated
Clearing Members have recently
identified the current give up process as
a significant source of risk for clearing
firms, and subsequently requested that
the Exchanges alleviate this risk by
amending Exchange rules governing the
give up process.8
Proposed Rule Change
Based on the above, the Exchange
now seeks to amend its rules regarding
the current give up process in order to
allow a Clearing Member to opt in, at
The Options Clearing Corporation
(‘‘OCC’’) clearing number level, to a
feature that, if enabled by the Clearing
Member, will allow the Clearing
Member to specify which Members are
authorized to give up that OCC clearing
number. Accordingly, Rule 707 will be
retitled as ‘‘Authorization to Give Up,’’
and the current rule text will be
replaced by new language. Specifically,
proposed Rule 707 will provide that for
each transaction in which a Member
participates, the Member may indicate,
at the time of the trade or through post
trade allocation, any OCC number of a
Clearing Member through which a
transaction will be cleared (‘‘Give Up’’),
provided the Clearing Member has not
elected to ‘‘Opt In,’’ as defined in
paragraph (b) of the proposed Rule, and
restrict one or more of its OCC
number(s) (‘‘Restricted OCC Number’’).
A Member may Give Up a Restricted
7 Furthermore, the Exchange previously issued
guidance on designating Give Ups in Regulatory
Information Circular 2016–001. This rule change
supersedes the Exchange’s previous interpretation.
8 See note 5 above.
E:\FR\FM\13JNN1.SGM
13JNN1
]]>Agencies
[Federal Register Volume 84, Number 114 (Thursday, June 13, 2019)]
[Notices]
[Pages 27675-27678]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-12451]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86066; File No. SR-C2-2019-015]
Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Relating
To Amend the Fat Finger Check for Simple Orders in Rule 6.14
June 7, 2019.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on June 6, 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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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
amend the fat finger check for with respect to simple orders in Rule
6.14. The text of the proposed rule change is provided below.
(additions are italicized; deletions are [bracketed])
* * * * *
Rules of Cboe C2 Exchange, Inc.
* * * * *
Rule 6.14. Order and Quote Price Protection Mechanisms and Risk
Controls
(a)-(b) No change.
(c) All Orders.
(1) Limit Order Fat Finger Check. If a User submits a buy (sell)
limit order to the System with a price that is more than a buffer
[[Page 27676]]
amount above (below) the NBO (NBB) for simple orders or the SNBO
(SNBB) for complex orders, the System cancels or rejects the order.
The Exchange determines a default buffer amount; however, a User may
establish a higher or lower amount than the Exchange default.
(A) For simple buy (sell) orders, the Exchange may determine to
apply this check on a class-by-class basis and not apply it to limit
orders entered prior to the conclusion of the RTH [O]opening auction
[P]process. If the check applies prior to the conclusion of the RTH
[O]opening auction [P]process, it uses [the midpoint of the prior
trading day's closing NBBO (prior to 9:30 a.m.) or](i) the last
disseminated NBBO on that trading day, or (ii) the midpoint of the
prior trading day's closing NBBO, if no NBBO has been disseminated
on that trading day[(if there is one, after 9:30 a.m.)]. The
Exchange or User, as applicable, may establish a different default
amount prior to the conclusion of the RTH [O]opening auction
[P]process than it does after trading is open. If the check applies
prior to the conclusion of the O]RTH opening auction [P]process, it
does not apply (i) if there is a corporate action impacting the
corporate stock price, (ii) if there is no NBBO from the prior
trading day, (iii) to orders with origin code M or N, or (iv) to GTC
and GTD orders that reenter the Book from the prior trading session
[day].
* * * * *
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
The proposed rule change amends the fat finger check with respect
to simple orders in Rule 6.14. Current Rule 6.14(c)(1) states if a User
submits a buy (sell) limit order to the System with a price that is
more than a buffer amount above (below) the national best offer
(``NBO'') (national best bid (``NBB'')) for simple orders, the System
cancels or rejects the order.\5\ Under current Rule 6.14(c)(1)(A) for
simple orders, the Exchange may determine to apply this check on a
class-by-class basis and not apply it to limit orders entered prior to
the conclusion of the opening auction process. If the check applies
prior to the conclusion of the opening auction process, it uses the
midpoint of the prior trading day's closing NBBO (prior to 9:30 a.m.)
or the last disseminated NBBO (if there is one, after 9:30 a.m.).\6\
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\5\ The Exchange determines a default buffer amount; however, a
User may establish a higher or lower amount than the Exchange
default.
\6\ Current Rule 6.14(c)(1)(A) also states that the Exchange or
User, as applicable, may establish a different default amount prior
to the conclusion of the opening auction process than it does after
trading is open. If the check applies prior to the conclusion of the
Opening Process, it does not apply (i) if there is a corporate
action impacting the corporate stock price, (ii) if there is no NBBO
from the prior trading day, (iii) to orders with origin code M
(Market-Maker) or N (away market-maker), or (iv) to good-til-
cancelled (``GTC'') or good-til-day (``GTD'') orders that reenter
the Book from the prior trading day.
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The Exchange recently adopted a global trading hours (``GTH'')
trading session, which will occur from 8:30 to 9:15 a.m. Eastern Time,
which the Exchange intends to implement on June 17, 2019.\7\ For
classes that trade during the GTH trading session, there may be an NBBO
disseminated prior to 9:30 a.m., as well as a GTH opening auction
process. Therefore, the Exchange proposes to update the fat finger
check for simple orders to reflect a GTH trading session. Because the
GTH and regular trading hours (``RTH'') trading sessions will each have
an opening auction process,\8\ the Exchange now proposes to amend Rule
6.14(c)(1)(A) to specify that if the check applies prior to the
conclusion of the RTH opening auction process (therefore, from the
beginning of the GTH opening process \9\ through the RTH opening
process), it uses the last disseminated NBBO during that trading day
(which accounts for NBBOs disseminated during GTH),\10\ or the midpoint
of the prior trading day's closing NBBO, if no NBBO has been
disseminated during that trading day. The Exchange notes that it is
deleting the language that refers to using the prior trading day's
closing NBBO if the check applies prior to 9:30 a.m., as well as
language that refers to an NBBO after 9:30 a.m., to accommodate the new
GTH session. For example, if it is 9:25 a.m. the check would use the
last disseminated NBBO from the GTH session (i.e., on that trading
day), and, if no NBBO has been disseminated on that trading day then
the System would pull the midpoint of the prior trading day's closing
NBBO, as it currently does today. It also proposes to amend Rule
6.14(c)(1)(A) to state that if the check applies prior to the
conclusion of the RTH opening auction process, it does not apply to
good-til-cancelled (``GTC'') and good-til-date (``GTD'') orders that
reenter the Book from the prior trading session. This proposed change
accounts for a prior trading session instead of the trading day because
the Exchange will use the same Book for all trading sessions, and thus
any GTC or GTD orders that do not trade during GTH may become eligible
for trading during RTH.
---------------------------------------------------------------------------
\7\ See 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).
\8\ See Rule 6.11 which provides for the opening auction
processes for GTH and RTH.
\9\ The Exchange notes this includes the queuing period as
defined under Rule 6.11 which provides for the opening auction
process.
\10\ See Rule 1.1 which states that a trading day includes both
trading sessions on that day. The Exchange also notes that it is
amending the term ``orders'' to state ``buy (sell) orders'' in Rule
6.14(c)(1)(A) to mirror the same language used in Rule 6.14(c)(1),
as well as the term ``Opening Process'' to ``opening auction
process'' which is consistent with the verbiage used throughout Rule
6.11 (Opening Auction Process).
---------------------------------------------------------------------------
The Exchange notes that the proposed change is substantially
similar to the current rule, and merely proposes to update language in
connection with the implementation of the GTH trading session,
specifying to which opening auction process the check under Rule
6.14(c)(1)(A) will apply, and accounting for the fact that there may be
an NBBO disseminated prior to 9:30 a.m. for classes that will trade
during the GTH trading session.
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.\11\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \12\ 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
[[Page 27677]]
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) \13\
requirement that the rules of an exchange not be designed to permit
unfair discrimination between customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
\13\ Id.
---------------------------------------------------------------------------
In particular, the Exchange believes that by updating the fat
finger check for simple orders to account for the recently adopted GTH
trading session, the proposed rule change serves to remove impediments
to and perfect the mechanism of a free and open market and a national
market system. As described above, the proposed change is substantially
similar to the way in which the current fat finger check for simple
orders functions, and merely accounts for the fact that there will be
two trading sessions on the Exchange, each with an opening auction
process and one of which will occur, and may disseminate an NBBO,
before 9:30 a.m. Therefore, the Exchange believes that by amending rule
language to specify that the fat finger check under Rule 6.14(c)(1)(A)
will apply prior to the conclusion of the RTH opening auction process
and by updating language to reflect the earlier GTH session time and
potential NBBO dissemination during that session in connection with the
fat finger check, it will remove impediments to and perfect the
mechanism of a free and open market, thereby protecting investors, by
increasing transparency of the Exchange's fat finger price protection
mechanism as it relates to the earlier GTH trading session.
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 is
not intended to address competitive issues, but rather to update a
current price protection mechanism in connection with the addition of a
GTH trading session. The Exchange does not believe that the proposed
rule change to update the fat finger check as it relates to the GTH
trading session will impose any burden on intramarket competition that
is not necessary or appropriate in furtherance of the purposes of the
Act because it will apply in the same manner to all Users' limit orders
prior to the conclusion of the RTH opening auction process. The
Exchange notes that a User may choose to establish a different default
amount prior to the conclusion of the RTH opening auction process.
Furthermore, the Exchange does not believe that the proposed change
will impose any burden on intermarket competition that that is not
necessary or appropriate in furtherance of the purposes of the Act
because the proposed change merely updates a price protection mechanism
already in place on the Exchange and applicable only to trading on the
Exchange.
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
The Exchange has designated this rule filing as non-controversial
under Section 19(b)(3)(A) \14\ of the Act and Rule 19b-4(f)(6) \15\
thereunder. 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, it has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6) thereunder.
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \16\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \17\ permits the
Commission to 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
Exchange believes that waiver of the operative delay is consistent with
the protection of investors and the public interest because it is
substantially similar to the way in which the current fat finger check
for simple orders functions, and merely accounts for the fact that
there will be two trading sessions on the Exchange (each with an
opening auction process and one of which will occur, and may
disseminate an NBBO, before 9:30 a.m.), and does not raise any new or
novel issues. For this reason, the Commission believes that waiver of
the 30-day operative delay is consistent with the protection of
investors and the public interest. Therefore, the Commission hereby
waives the operative delay and designates the proposal as operative
upon filing.\18\
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\16\ 17 CFR 240.19b-4(f)(6).
\17\ 17 CFR 240.19b-4(f)(6)(iii).
\18\ For purposes only of waiving the 30-day operative delay,
the Commission also has 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. If the Commission
takes such action, the Commission shall 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-C2-2019-015 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-C2-2019-015. 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
[[Page 27678]]
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-C2-2019-015
and should be submitted on or before July 5, 2019.
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\19\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-12451 Filed 6-12-19; 8:45 am]
BILLING CODE 8011-01-P
