Self-Regulatory Organizations; Cboe BZX 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, 28110-28113 [2019-12657]
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Federal Register / Vol. 84, No. 116 / Monday, June 17, 2019 / Notices
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B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
The Exchange believes that the
introduction of the M–ELO+CB will
only boost the utility of the M–ELO
among market participants who want
the benefits of M–ELO but require
additional trading flexibility.
Accordingly, the Exchange expects that
its proposal will draw new market
participants to Nasdaq and increase the
extent to which existing participants
utilize the M–ELO concept. To the
extent the proposed change is successful
in attracting additional market
participants, Nasdaq believes that the
proposed change will promote
competition among trading venues by
making Nasdaq a more attractive trading
venue for long-term investors and
therefore capital formation.
Additionally, adoption of M–ELO+CB
will not burden any market participants.
Just as with an ordinary M–ELOs, the
M–ELO+CB will be available to all
Nasdaq members and it will be available
on an optional basis. Thus, any member
that seeks to avail itself of the benefits
of a M–ELO+CB can choose accordingly.
Although the proposal provides
potential benefits for investors that
select the M–ELO+CB order type, the
Exchange believes that all market
participants will benefit to the extent
that this proposal contributes to a
healthy and attractive market that is
attentive to the needs of all types of
investors.
The proposal also will not adversely
impact market participants that choose
not to use this M–ELO+CB because no
changes need to be made to participants’
systems to account for it. As discussed
above, M–ELO+CB executions will be
reported the same as other executions,
without any new or special indicator.
Similarly, the proposal will benefit
members that enter Midpoint Orders on
the Continuous by providing them with
flexibility to have their orders execute
in situations where they would not do
so now. Again, however, this flexibility
will be optional. Any member that
wants its Midpoint Orders to interact
with M–ELO+CBs can choose
accordingly.
In any event, the Exchange notes that
it operates in a highly competitive
market in which market participants can
readily choose between competing
venues if they deem participation in
Nasdaq’s market is no longer desirable.
In such an environment, the Exchange
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must carefully consider the impact that
any change it proposes may have on its
participants, understanding that it will
likely lose participants to the extent a
change is viewed as unfavorable by
them. Because competitors are free to
modify the incentives and structure of
their markets, the Exchange believes
that the degree to which modifying the
market structure of an individual market
may impose any burden on competition
is limited. Last, to the extent the
proposed change is successful in
attracting additional market
participants, Nasdaq also believes that
the proposed change will promote
competition among trading venues by
making Nasdaq a more attractive trading
venue for long-term investors and
therefore capital formation.
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
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) By order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be 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:
All submissions should refer to File
Number SR–NASDAQ–2019–048. 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–NASDAQ–2019–048, and
should be submitted on or before July 8,
2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–12655 Filed 6–14–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
[Release No. 34–86085; File No. SR–
CboeBZX–2019–050]
• 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–
NASDAQ–2019–048 on the subject line.
Self-Regulatory Organizations; Cboe
BZX 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
Paper Comments
June 11, 2019.
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
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CFR 200.30–3(a)(12).
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‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 6,
2019, Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Exchange filed the
proposal as a ‘‘non-controversial’’
proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX Options’’)
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/
equities/regulation/rule_filings/bzx/), 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
In 2016, the Exchange’s parent
company, Cboe Global Markets, Inc.
(‘‘Cboe Global’’), which is also the
parent company of Cboe Exchange, Inc.
(‘‘Cboe Options’’) and Cboe C2
Exchange, Inc. (‘‘C2’’), acquired the
Exchange, Cboe EDGA Exchange, Inc.
(‘‘EDGA’’), Cboe EDGX Exchange, Inc.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
2 17
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(‘‘EDGX or EDGX Options’’), and Cboe
BYX Exchange, Inc. (‘‘BYX’’ and,
together with the Exchange, C2, Cboe
Options, EDGA, and EDGX, 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, C2 and EDGX
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.
The Exchange proposes to adopt LOC
and MOC orders under Rule 21.1(f).
Proposed Rule 21.1(f)(7) defines an LOC
order as a limit order, and proposed
Rule 21.1(f)(8) defines a MOC order as
a market order, respectively, that it may
only execute on the Exchange no earlier
than three minutes prior to the market
close.6 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 21.8.7 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
market close. The Exchange queues LOC
and MOC orders in the System until
5 The Exchange also notes that its affiliated
exchanges, C2 and EDGX Options, are
simultaneously proposing to make similar changes
in order to align functionality with Cboe Options.
6 See Rule 16.1(a)(35) which defines the term
‘‘market close’’ as the time specified by the
Exchange for the cessation of trading in contracts
on the Exchange for options on that market day.
The time specified by the Exchange for the
cessation of trading is set out in Rule 21.2, which
specifies that orders and bids and offers shall be
open and available for execution as of 9:30 a.m.
Eastern Time and shall close as of 4:00 p.m. Eastern
Time except for option contracts on Fund Shares,
on exchange-traded notes including Index-Linked
Securities, and on broad-based indexes, which may
close as of 4:15 p.m. Eastern Time. See Rule 21.2(a).
7 Rule 21.8 describes how the System processes
orders and quotes in the Book.
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28111
three minutes before the 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 21.8. The
Exchange believes that three minutes
prior to the 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
market close.8 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 market close. This is
consistent with the purpose of these
orders, which is to execute near the
market close on the day they were
submitted to the Exchange. 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.9 The proposed
order types are based on substantially
similar order types available on Cboe
Options.10 MOC and LOC orders allow
a User to execute orders in a series close
to the close time.
The Exchange also proposes to
include in the proposed MOC definition
additional order handling for MOC
orders during a ‘‘Limit State’’ or
‘‘Straddle State’’ as defined in the
Regulation NMS Plan to address
Extraordinary Market Volatility (‘‘Limit
Up-Limit Down Plan’’). The proposed
change provides that a MOC order will
not be elected if the underlying security
8 The Exchange notes that Cboe Options currently
triggers the MOC and LOC orders three minutes
prior to the market close.
9 See Rule 21.1(f)(3) which defines time-in-force
of ‘‘Day’’ as an order, so designated, a limit order
to buy or sell which, if not executed expires at
market close. All bulk messages have a time-inforce of Day. See also Securities Exchange Act
Release No. 84928 (December 21, 2018), 83 FR
67794 (December 31, 2018) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change
Relating To Adopt Definitions of Ports and
Discontinue Bulk Order Functionality and
Implement Bulk Message Functionality) (SR–
CboeBZX–2018–092). Note Users may submit bulk
messages within three minutes of the market close,
which would ultimately be handled in the same
manner as an LOC order.
10 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.
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Federal Register / Vol. 84, No. 116 / Monday, June 17, 2019 / Notices
is in a Limit or Straddle State three
minutes prior to the market close. If the
underlying security exits the Limit or
Straddle State prior to the market close,
the System will attempt to re-evaluate,
elect, and execute the order. The
Exchange notes that the proposed
handling of MOC orders in a Limit or
Straddle State is consistent with the
Limit Up-Limit Down Plan and is based
on the corresponding Cboe Options rule
regarding handling of MOC orders,11 as
well as other order type definitions
within the Exchange Rules that provide
for similar additional handling during
Limit and Straddle States.12
2. Statutory Basis
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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.13 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 14 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) 15 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
11 See
Cboe Options Rule 6.45(d)(2).
Rule 21.1(d)(5) and (d)(11), which provide
additional order handling for Market Orders and
Stop Orders, respectively, in a Limit and/or
Straddle State. The Exchange notes that during a
Limit or Straddle State limit orders are not
impacted and continue to be eligible for execution.
13 15 U.S.C. 78f(b).
14 15 U.S.C. 78f(b)(5).
15 Id.
12 See
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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.16
Furthermore, the Exchange believes
specifying that the MOC and LOC may
execute no more than three minutes
from the market 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 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 the 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 the
trading day and update bulk messages
in response to day-to-day changed
market conditions.17 Because MOC and
LOC orders are only available for
execution for three minutes prior to the
market close, as opposed to during the
entire trading day, 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.
Additionally, the Exchange believes
that the proposed additional order
handling for MOC during a Limit or
Straddle 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,18 as well as other order
type definitions within the Exchange
Rules that provide for similar additional
handling during Limit and Straddle
States.19
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.20 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.21 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
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.22
19 See
20 See
16 See
supra note 10.
17 See supra note 9.
18 See supra note 11.
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supra note 12.
supra note 5.
21 Id.
22 See
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supra notes 10–11.
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Federal Register / Vol. 84, No. 116 / Monday, June 17, 2019 / Notices
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.
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.
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 23 and Rule 19b–4(f)(6)
thereunder.24
A proposed rule change filed under
Rule 19b–4(f)(6) 25 normally does not
become operative for 30 days after the
date of filing. However, pursuant to
Rule 19b–4(f)(6)(iii) 26 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
June 20, 2019, the day before the
Exchange would like to implement
MOC and LOC orders.27
At any time within 60 days of the
filing of the proposed rule change, the
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:
23 15
U.S.C. 78s(b)(3)(A).
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.
25 17 CFR 240.19b–4(f)(6).
26 17 CFR 240.19b–4(f)(6)(iii).
27 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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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–
CboeBZX–2019–050 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–CboeBZX–2019–050. 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–CboeBZX–2019–050 and
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28113
should be submitted on or before July 8,
2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–12657 Filed 6–14–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86082; File No. SR–
CboeEDGX–2019–034]
Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change Relating To
Update Its Price Adjust Process To
Allow for the Process To Apply to Bulk
Messages
June 11, 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 June 4,
2019, Cboe EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Exchange filed the
proposal as a ‘‘non-controversial’’
proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX Options’’)
proposes to update its Price Adjust
process to allow for the process to apply
to bulk messages. The text of the
proposed rule change is provided in
Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
options/regulation/rule_filings/edgx/),
at the Exchange’s Office of the
Secretary, and at the Commission’s
Public Reference Room.
28 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
E:\FR\FM\17JNN1.SGM
17JNN1
]]>Agencies
[Federal Register Volume 84, Number 116 (Monday, June 17, 2019)]
[Notices]
[Pages 28110-28113]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-12657]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86085; File No. SR-CboeBZX-2019-050]
Self-Regulatory Organizations; Cboe BZX 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 11, 2019.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the
[[Page 28111]]
``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on June 6, 2019, Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX'')
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 BZX Exchange, Inc. (the ``Exchange'' or ``BZX Options'')
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/equities/regulation/rule_filings/bzx/), 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''), which is also the parent company of Cboe Exchange,
Inc. (``Cboe Options'') and Cboe C2 Exchange, Inc. (``C2''), acquired
the Exchange, Cboe EDGA Exchange, Inc. (``EDGA''), Cboe EDGX Exchange,
Inc. (``EDGX or EDGX Options''), and Cboe BYX Exchange, Inc. (``BYX''
and, together with the Exchange, C2, Cboe Options, EDGA, and EDGX, 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, C2 and EDGX 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.
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\5\ The Exchange also notes that its affiliated exchanges, C2
and EDGX Options, are simultaneously proposing to make similar
changes in order to align functionality with Cboe Options.
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The Exchange proposes to adopt LOC and MOC orders under Rule
21.1(f). Proposed Rule 21.1(f)(7) defines an LOC order as a limit
order, and proposed Rule 21.1(f)(8) defines a MOC order as a market
order, respectively, that it may only execute on the Exchange no
earlier than three minutes prior to the market close.\6\ 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 21.8.\7\ 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
market close. The Exchange queues LOC and MOC orders in the System
until three minutes before the 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 21.8. The
Exchange believes that three minutes prior to the 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 market close.\8\ 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
market close. This is consistent with the purpose of these orders,
which is to execute near the market close on the day they were
submitted to the Exchange. 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.\9\ The proposed order types are
based on substantially similar order types available on Cboe
Options.\10\ MOC and LOC orders allow a User to execute orders in a
series close to the close time.
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\6\ See Rule 16.1(a)(35) which defines the term ``market close''
as the time specified by the Exchange for the cessation of trading
in contracts on the Exchange for options on that market day. The
time specified by the Exchange for the cessation of trading is set
out in Rule 21.2, which specifies that orders and bids and offers
shall be open and available for execution as of 9:30 a.m. Eastern
Time and shall close as of 4:00 p.m. Eastern Time except for option
contracts on Fund Shares, on exchange-traded notes including Index-
Linked Securities, and on broad-based indexes, which may close as of
4:15 p.m. Eastern Time. See Rule 21.2(a).
\7\ Rule 21.8 describes how the System processes orders and
quotes in the Book.
\8\ The Exchange notes that Cboe Options currently triggers the
MOC and LOC orders three minutes prior to the market close.
\9\ See Rule 21.1(f)(3) which defines time-in-force of ``Day''
as an order, so designated, a limit order to buy or sell which, if
not executed expires at market close. All bulk messages have a time-
in-force of Day. See also Securities Exchange Act Release No. 84928
(December 21, 2018), 83 FR 67794 (December 31, 2018) (Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change
Relating To Adopt Definitions of Ports and Discontinue Bulk Order
Functionality and Implement Bulk Message Functionality) (SR-CboeBZX-
2018-092). Note Users may submit bulk messages within three minutes
of the market close, which would ultimately be handled in the same
manner as an LOC order.
\10\ 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.
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The Exchange also proposes to include in the proposed MOC
definition additional order handling for MOC orders during a ``Limit
State'' or ``Straddle State'' as defined in the Regulation NMS Plan to
address Extraordinary Market Volatility (``Limit Up-Limit Down Plan'').
The proposed change provides that a MOC order will not be elected if
the underlying security
[[Page 28112]]
is in a Limit or Straddle State three minutes prior to the market
close. If the underlying security exits the Limit or Straddle State
prior to the market close, the System will attempt to re-evaluate,
elect, and execute the order. The Exchange notes that the proposed
handling of MOC orders in a Limit or Straddle State is consistent with
the Limit Up-Limit Down Plan and is based on the corresponding Cboe
Options rule regarding handling of MOC orders,\11\ as well as other
order type definitions within the Exchange Rules that provide for
similar additional handling during Limit and Straddle States.\12\
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\11\ See Cboe Options Rule 6.45(d)(2).
\12\ See Rule 21.1(d)(5) and (d)(11), which provide additional
order handling for Market Orders and Stop Orders, respectively, in a
Limit and/or Straddle State. The Exchange notes that during a Limit
or Straddle State limit orders are not impacted and continue to be
eligible for execution.
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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.\13\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \14\ 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) \15\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
\15\ Id.
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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.\16\
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\16\ See supra note 10.
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Furthermore, the Exchange believes specifying that the MOC and LOC
may execute no more than three minutes from the market 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 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 the 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
the trading day and update bulk messages in response to day-to-day
changed market conditions.\17\ Because MOC and LOC orders are only
available for execution for three minutes prior to the market close, as
opposed to during the entire trading day, 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.
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\17\ See supra note 9.
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Additionally, the Exchange believes that the proposed additional
order handling for MOC during a Limit or Straddle 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,\18\ as well as other order type definitions within the
Exchange Rules that provide for similar additional handling during
Limit and Straddle States.\19\
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\18\ See supra note 11.
\19\ See supra note 12.
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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.\20\ 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.\21\
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.
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\20\ See supra note 5.
\21\ Id.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The 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 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.\22\
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\22\ See supra notes 10-11.
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[[Page 28113]]
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 \23\ and Rule 19b-4(f)(6)
thereunder.\24\
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\23\ 15 U.S.C. 78s(b)(3)(A).
\24\ 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.
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A proposed rule change filed under Rule 19b-4(f)(6) \25\ normally
does not become operative for 30 days after the date of filing.
However, pursuant to Rule 19b-4(f)(6)(iii) \26\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest.
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\25\ 17 CFR 240.19b-4(f)(6).
\26\ 17 CFR 240.19b-4(f)(6)(iii).
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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.\27\
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\27\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is 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-CboeBZX-2019-050 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-CboeBZX-2019-050. 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-CboeBZX-2019-050 and should be submitted
on or before July 8, 2019.
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\28\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-12657 Filed 6-14-19; 8:45 am]
BILLING CODE 8011-01-P
