Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating To Amend Rule 5.72 To Eliminate the Requirement That Leg Prices Be Submitted Prior to the Time a Complex FLEX Order is Represented in an Open Outcry FLEX Auction, 70235-70239 [2019-27460]
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Order, and each converted order is
processed accordingly.14
Finally, the Exchange proposes to
delete the last two sentences in the
description of each type of Stop Order,
which provides for the rejection of such
orders to buy (sell) if entered with a stop
price below the bid (or above the
offer).15 The Exchange states that this
language is not accurate because the
Exchange does not reject Stop Orders so
priced, but instead would execute such
orders once triggered.16 This proposed
change would reflect current Exchange
functionality.17
Rule 6.62–O(d)(4): AON Orders. An
AON Order is a Market or Limit Order
that is to be executed in its entirety or
not at all.18 The Exchange proposes to
make clear that an AON Order that does
not execute on arrival will not be
displayed or routed to another Market
Center (i.e., AON Orders may only be
executed on the Exchange) and would
have no standing in any Order Process
in the Consolidated Book.19 Further, the
Exchange proposes to clarify that AON
Orders are not eligible to execute against
incoming interest but rather may
execute solely against interest resting in
the Consolidated Book when sufficient
size is available.20 Finally, the Exchange
proposes to specify that the System
monitors the Consolidated Book for
AON Order execution opportunities.21
Rule 6.76A–O: Order Execution.
Current Rule 6.76A–O(b)(1)(A) provides
that ‘‘[a]n incoming marketable bid or
offer shall be matched against orders
within the Working Order Process in the
order of their ranking, at the price of the
displayed portion (or in the case of an
All-or-None Order, or at the limit price),
for the total amount of option contracts
available at that price or for the size of
the incoming bid or offer, whichever is
smaller.’’ 22 The Exchange proposes to
add ‘‘of Reserve Orders’’ to make clear
that reference to ‘‘the price of the
displayed portion’’ refers to such
orders.23 In addition, the Exchange
proposes to amend and reorganize the
language regarding AON Orders to
provide that incoming interest is
14 See proposed Rule 6.62–O(d)(1), (2). See also
Rule 6.62–O(a), (b) (defining Market Order and
Limit Order, respectively).
15 See proposed Rule 6.62–O(d)(1), (2).
16 See Notice, supra note 3, 84 FR at 60129.
17 See id.
18 See Rule 6.62–O(d)(4).
19 See proposed Rule 6.62–O(d)(4). See also Rule
6.76–O(a)(2)(C) (providing that AON Orders within
the Working Order Process are ‘‘ranked based on
the specified limit price and the time of order
entry’’).
20 See proposed Rule 6.62–O(d)(4).
21 See id.
22 See Rule 6.76A–O(b)(1)(A).
23 See proposed Rule 6.76A–O(b)(1)(A).
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‘‘matched against orders within the
Working Order Process in the order of
their ranking, at the price of the
displayed portion of Reserve Orders, or
at the limit price of AON Orders, for the
total amount of option contracts
available at that price or for the size of
the incoming bid or offer, whichever is
smaller.’’ 24
III. Discussion and Commission’s
Findings
After careful review, the Commission
finds that the proposed rule change is
consistent with the requirements of the
Act 25 and the rules and regulations
thereunder applicable to a national
securities exchange.26 In particular, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act,27 which requires,
among other things, that the rules of a
national securities exchange be
designed to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in regulating 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, and not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
The Commission notes that the
Exchange represents it is not proposing
to change or alter any obligations, rights,
policies or practices. The Commission
notes that the proposal would delete
inaccurate language regarding Stop
Orders and clarify the descriptions
regarding the functionality of
Contingency Orders, Working Orders,
Stop Orders, and AON Orders. In
addition, the proposal would make
organizational and non-substantive
changes to the rule text. The
Commission believes this should add
transparency and clarity to the
Exchange’s rules, without altering
current functionality, to the benefit of
investors, market participants, and the
public in general.
For the reasons discussed above, the
Commission believes that the proposed
rule change is consistent with the Act.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,28 that the
24 See
id.
25 15 U.S.C. 78(f).
26 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
27 15 U.S.C. 78f(b)(5).
28 15 U.S.C. 78s(b)(2).
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proposed rule change (SR–NYSEArca–
2019–71) be, and it hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.29
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019–27454 Filed 12–19–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87765; File No. SR–CBOE–
2019–117]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating To Amend Rule
5.72 To Eliminate the Requirement
That Leg Prices Be Submitted Prior to
the Time a Complex FLEX Order is
Represented in an Open Outcry FLEX
Auction
December 16, 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 December
6, 2019, Cboe Exchange, Inc. (the
‘‘Exchange’’ or ‘‘Cboe Options’’) 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 ‘‘noncontroversial’’ 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 Exchange, Inc. (the ‘‘Exchange’’
or ‘‘Cboe Options’’) proposes to amend
Rule 5.72. The text of the proposed rule
change is provided below.
(additions are italics; deletions are
[bracketed])
*
*
*
*
*
Rules of Cboe Exchange, Inc.
*
*
*
*
*
Rule 5.72. FLEX Trading
(a) No change.
29 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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(b) FLEX Orders. A FLEX Option
series is only eligible for trading if a
FLEX Trader (the ‘‘Submitting FLEX
Trader’’) (i) submits a FLEX Order for
that series into an electronic FLEX
Auction pursuant to paragraph (c) of
this Rule, (ii) represents the FLEX Order
in an open outcry FLEX Auction
pursuant to paragraph (d) of this Rule,
or (iii) submits the FLEX Order to a
FLEX AIM or SAM Auction pursuant to
Rule 5.73 or 5.74, respectively.
(1) No change.
(2) Complex FLEX Order. A FLEX
Order for a FLEX Option complex
strategy submitted to the System must
satisfy the criteria for a complex FLEX
Order set forth in Rule 5.70(b) and
include size, side of the market, and a
net debit or credit price[, and a bid or
offer price for each leg of the FLEX
Order, which leg prices must add
together to equal the net price].
Additionally, each leg of the FLEX
Option complex strategy must include
all terms for a FLEX Option series set
forth in Rule 4.21 (including that a nonFLEX Option series with identical terms
is not listed for trading), subject to the
order entry requirements set forth in
Rule 5.7.
(A) A complex FLEX Order submitted
into the System for an electronic FLEX
Auction pursuant to paragraph (c)
below must include a bid or offer price
for each leg, which leg prices must add
together to equal the net price.
(B) A complex FLEX Order submitted
into the System prior to representation
in an open outcry FLEX Auction
pursuant to paragraph (d) below may
include a bid or offer price on one or
more of the legs (subject to a FLEX
Trader’s responsibilities pursuant to
Rule 5.91 and Chapter 9). The execution
leg prices must be entered or modified,
as necessary, via PAR following
execution of the order, which prices
must add together to equal the net
execution price.
*
*
*
*
*
The text of the proposed rule change
is also available on the Exchange’s
website (https://www.cboe.com/
AboutCBOE/CBOELegal
RegulatoryHome.aspx), 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
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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 Exchange proposes to amend
Rule 5.72(b) regarding the information
required in a FLEX Order 5 for a FLEX
Option complex strategy submitted to
the System for execution in an open
outcry FLEX Auction.6 A FLEX Option
series is only eligible for trading if a
FLEX Trader (the ‘‘Submitting FLEX
Trader’’) submits a FLEX Order for that
series into an electronic FLEX Auction
pursuant to Rule 5.72(c) or represents
the FLEX Order in an open outcry FLEX
Auction pursuant to Rule 5.72(d).7
Currently, Rule 5.72(b) provides that a
FLEX Order for a FLEX Option complex
strategy submitted to the System must
satisfy the criteria for a complex FLEX
Order set forth in Rule 5.70(b) 8 and
include size, side of the market, a net
debit or credit price, and a bid or offer
price for each leg of the FLEX Order,
which leg prices must add together to
equal that net price. This applies to
complex FLEX Orders submitted for
both electronic and open outcry
execution.
The proposed rule change removes
the requirement that a FLEX Order
submitted into the System prior to
representation in an open outcry FLEX
Auction include leg prices at the time of
order submission.9 Specifically,
5A
‘‘FLEX Order’’ is an order submitted in a
FLEX Option. See Rule 5.70(a). A ‘‘FLEX Option’’
means a flexible exchange option. See Rule 1.1.
6 See Rule 5.72(d) for a description of the open
outcry FLEX Auction process.
7 See Rule 5.72(b). A FLEX Option series may also
be eligible for trading if the Submitting FLEX
Trader submits the FLEX Order to a FLEX
Automated Improvement Mechanism auction or
FLEX Solicitation Auction Mechanism auction
pursuant to Rule 5.73 or 5.74, respectively.
8 Rule 5.70(b) requires each leg of a complex
FLEX Order to: (1) be for a FLEX Option series
authorized for FLEX trading with the same
underlying equity security or index; (2) must have
the same exercise style (American or European);
and (3) for a FLEX Index Option, may have a
different settlement type (a.m.-settled or p.m.settled), except each leg must have the same
settlement type if designated as Asian-settled or
Cliquet-settled.
9 The proposed rule change has no impact on
complex FLEX Orders submitted for electronic
execution. The proposed rule change moves the
requirement that a complex FLEX Order submitted
into the System for an electronic FLEX Auction
pursuant to Rule 5.72(c) include a bid or offer price
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proposed Rule 5.72(b)(2)(B) states a
complex FLEX Order submitted into the
System prior to representation in an
open outcry FLEX Auction pursuant to
paragraph (d) of Rule 5.72 may include
a bid or offer price on one or more of
the legs (subject to a FLEX Trader’s
responsibilities pursuant to Rule 5.91
(which describes responsibilities of a
floor broker) and Chapter 9 (which
describes obligations on Trading Permit
Holders that do business with the
public)). The execution leg prices must
be entered or modified, as necessary, via
PAR following execution of the order,
which prices must add together to equal
the net execution price.
When a floor broker (which is the
Submitting FLEX Trader with respect to
open outcry FLEX trading) receives an
order from a customer, the floor broker
must systematize the terms of that order,
including any limit price (which is the
net price with respect to a complex
order).10 As noted above, current Rule
5.72(b)(2) requires a Submitting FLEX
Trader (i.e., a floor broker with respect
to open outcry trading) to systematize
prices of all legs of a complex order
upon submission. The Exchange
imposed this requirement for both
electronic and open outcry FLEX orders
for consistency within the Rules.
Additionally, the Exchange believed
this requirement to be appropriate due
to the lack of electronic leg markets in
FLEX options. In the non-FLEX market,
there is no requirement to systematize
leg prices upon submission of a
complex order. In a non-FLEX market,
there is a book and a national best bid
or offer, and as a result, the System has
a benchmark to use to determine
execution leg prices based on the net
for each leg, which leg prices must add together to
equal the net price, to proposed Rule 5.72(b)(2)(A).
10 See Rule 5.7(f) (which requires systemization of
the terms of an order, which would include the
limit price if a limit order); see also Rule 5.6(b)
(which defines a ‘‘limit order’’ as an order to buy
or sell a stated number of option contracts at a
specified price or better). Customers that trade
complex limit orders generally only provide a limit
price for the net price, as they are ultimately
looking for execution of the entire package to occur
at a certain price (or better). However, it is possible
(although uncommon) that a customer may provide
a limit price for one or more of the legs, which the
floor broker would also be required to systematize
upon entry as a term of the order. In addition to
the definition of a limit order, which may not trade
at a price worse than the limit price, floor brokers
are required to use due diligence to execute an
order at the best prices available, as well as in
accordance with the rules (including the definition
of a limit order) and general floor broker
responsibilities. See Rule 5.91(a); see also Rule
5.91(c) (which provides that an order entrusted to
a floor broker is considered not held, which (as
defined in Rule 5.6(c)) gives a floor broker
discretion as to the price and time at which an order
is to be executed, subject to a client’s specified
instruction).
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execution price of a complex order
(which leg prices may not be outside of
the best prices of orders and quotes in
the book for those legs). This is not the
case in the FLEX market, in which there
is no market in the leg series of complex
orders that the System can use to
calculate appropriate execution prices
of the legs of a complex strategy (for
which there are countless combinations
of prices). Therefore, the Exchange
believed requiring the leg prices to be
input upon submission of a complex
FLEX order would provide the System
with this benchmark information to use
when determining leg execution prices
based on the net execution price.
Because of the automatic execution of
an electronic FLEX order following the
electronic FLEX auction, which auction
is based on the net execution price, the
Exchange continues to believe the
requirement to input leg prices upon
submission of an order to an electronic
FLEX auction is appropriate. However,
in open outcry FLEX trading (as well as
open outcry non-FLEX trading), the
FLEX auction process functions as a
price negotiation through which the net
execution price, as well as the leg
execution prices (that add up to that net
execution price) are determined. Since
the open outcry FLEX Auction process
can be used to determine leg prices for
a complex FLEX order after the parties
agree to a net execution price, the
Exchange believes it is reasonable to
permit a Submitting FLEX Trader to
input leg prices into the System either
upon submission of a complex FLEX
Order (and adjusted as necessary
following execution), or only following
execution. If a Submitting FLEX Trader
includes leg prices in a complex FLEX
Order upon submission of the order, the
execution prices of those legs may be
modified following the auction (subject
to any limit price for a leg as instructed
by a customer), as long as they add up
to the net execution price.
The proposed rule change permits a
Submitting FLEX Trader to continue to
input those leg prices upon submission
of the order and modify them as
necessary following execution, or input
them after execution. The proposed rule
change is not modifying how complex
FLEX Orders may be executed in open
outcry, or the execution information
that must be provided to the Exchange.
Any leg prices input upon
systematization of an order are visible
only to the FLEX Trader on its PAR
workstation. Prior to representing a
complex order to the trading crowd, a
FLEX Trader will generally request a
market from the trading crowd. FLEX
Traders (generally market-makers) in the
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trading crowd will respond with a
market for the net price. Market-makers
price the orders and the legs based on
their own pricing models—they do not
know the net limit price or the leg price
of the systematized order, as a floor
broker does not announce the leg prices
when it represents the order on the
trading floor. Once the crowd agrees on
a net price, it then negotiates prices for
the legs, which the Submitting FLEX
Trader will input (or update, if
applicable) into the order record on its
PAR workstation. Therefore, whether a
FLEX Trader inputs leg prices before an
execution (and modifies them as
necessary after execution to reflect floor
negotiations during the open outcry
auction (if necessary), or only inputs the
execution leg prices after execution, has
no impact on the open outcry FLEX
auction or the prices at which FLEX
complex orders (and the prices of the
legs of those orders) trade. The proposed
rule change is merely modifying the
time at which FLEX Traders may
provide the information to the
Exchange.
The Exchange will issue an Exchange
Notice announcing the implementation
date for the proposed rule change,
which date the Exchange expects to be
within the next two weeks. This will
permit the Exchange to implement the
proposed rule change within its system
and provide sufficient notice of the
change and its related requirements to
Trading Permit Holders.
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
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
U.S.C. 78f(b).
12 15 U.S.C. 78f(b)(5).
Frm 00092
Fmt 4703
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
the proposed rule change will remove
impediments to and perfect the
mechanism of a free and open market by
providing Submitting FLEX Traders
with the flexibility to input leg prices of
complex strategies either upon entry of
a complex FLEX Order or following
execution. The Exchange believes this
may lead to more efficient open outcry
executions on behalf of a floor broker’s
customer, as a Submitting FLEX Trader
will not be required to take the time to
input leg prices upon submission of the
order and then modify them after
execution to reflect these negotiations,
which ultimately benefits investors (as
further discussed below). As noted
above, because any leg prices of a
complex FLEX order input upon
systematization are only known to the
Submitting FLEX Trader and not known
to any other person in the trading
crowd, the Exchange believes the
proposed rule change will have no
impact on the manner in which
complex FLEX Orders are negotiated
and executed in open outcry. The
proposed rule change is not modifying
how complex FLEX Orders may be
executed in open outcry, or the
information that Submitting FLEX
Traders must provide to the Exchange.
The proposed rule change is merely
modifying the time at which Submitting
FLEX Traders may provide certain
information to the Exchange.
The Exchange believes the proposed
rule change will protect investors,
because it will permit a floor broker to
request a market and execute a
customer’s order in open outcry in a
more timely fashion. FLEX orders may
include a substantial number of legs
(they regularly include more than ten
legs, but may include up to 100 legs).
Inputting leg prices for a large number
of legs may be a time-consuming
exercise (and as noted above, it is
ultimately unnecessary prior to an open
outcry FLEX auction 14 given the
negotiations that occur during such an
auction), which may delay execution of
the customer’s order and potentially
miss an opportunity for execution at
prices based on then-current market
conditions. While the proposed rule
change has virtually no impact on other
members of the trading crowd, the
proposed rule change provides a floor
13 Id.
14 This is subject to a floor broker’s general
obligation to adhere to its customers’ instructions.
See supra note 10.
11 15
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broker with flexibility that may result in
a timelier execution of its customer’s
FLEX order.
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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 that the
proposed rule change 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 to all Submitting
FLEX Traders that represent complex
FLEX Orders (i.e., floor brokers) in open
outcry in the same manner. All
Submitting FLEX Traders will have the
option to input leg prices on a complex
FLEX Order upon submission of the
order to an open outcry FLEX Auction,
or following execution of that FLEX
Order. As noted above, because the
remainder of the trading crowd does not
currently know the leg prices
systematized by the Submitting FLEX
Trader, the proposed rule change will
have virtually no impact on other
market participants. The proposed rule
change is not modifying the information
that FLEX Traders must provide to the
Exchange—it is merely modifying the
time at which FLEX Traders may
provide the information to the
Exchange. The Exchange believes
applying the proposed rule change to
open outcry FLEX auctions but not
electronic FLEX auctions is reasonable
given the ability for the trading crowd
to negotiate the leg prices in open
outcry, while the System has no ability
to price the legs based on the net
execution price without an electronic
leg market.
The Exchange does not believe that
the proposed rule change will impose
any burden on intermarket competition
that is not necessary or appropriate in
furtherance of the purposes of the Act,
because it relates solely to the timing of
the input of leg prices of FLEX Orders
that may be executed on the Exchange.
The proposed rule change merely
provides Submitting FLEX Traders with
flexibility regarding when they may
input leg prices for complex FLEX
Orders submitted for open outcry
execution—either upon submission of
the order or following execution of the
order. The proposed rule change will
have no impact on how, or the prices at
which, a complex FLEX Order may
execute in an open outcry FLEX
Auction.
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 15 and Rule 19b–
4(f)(6) thereunder.16
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 17 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 18
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
requested that the Commission waive
the 30-day operative delay so that the
proposal may become operative upon
filing. The Exchange stated that it
believes, among other things, that
waiver of the operative delay will
permit FLEX Traders to take advantage
of the proposed flexibility and the
potential for more efficient open outcry
FLEX executions as soon as possible,
which it believes will ultimately benefit
customers of floor brokers.
The Commission believes that waiver
of the operative delay is appropriate
because, as the Exchange stated, the rule
change is not modifying the information
that a Submitting FLEX Trader must
provide to Exchange, but only the time
at which such information may be
provided to the Exchange and is not
changing the way a FLEX Order is
executed in an open outcry FLEX
auction. The rule proposal also makes
clear that if one or more of the legs is
submitted with a limit price the
Submitting FLEX Trader must enter the
15 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, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
17 17 CFR 240.19b–4(f)(6).
18 17 CFR 240.19b–4(f)(6)(iii).
16 17
PO 00000
Frm 00093
Fmt 4703
Sfmt 4703
leg prices upon entry of the terms of the
order. For these reasons, the
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest. Accordingly, the
Commission designates the proposed
rule change to be operative upon
filing.19
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CBOE–2019–117 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–CBOE–2019–117. 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
19 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).
E:\FR\FM\20DEN1.SGM
20DEN1
Federal Register / Vol. 84, No. 245 / Friday, December 20, 2019 / Notices
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–CBOE–2019–117 and
should be submitted on or before
January 10, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019–27460 Filed 12–19–19; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–87760; File No. SR–BX–
2019–045]
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change to the Exchange’s
Transaction Fees and Credits and
Qualified Market Maker Program, at
Equity 7, Section 118
jbell on DSKJLSW7X2PROD with NOTICES
December 16, 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 December
11, 2019, Nasdaq BX, Inc. (‘‘BX’’ 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.
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Sep<11>2014
18:30 Dec 19, 2019
Jkt 250001
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
SECURITIES AND EXCHANGE
COMMISSION
20 17
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend: (i)
The Exchange’s transaction fees and
credits, at Equity 7, Section 118(a); and
(ii) its Qualified Market Maker Program,
at Equity 7, Section 118(f), as described
further below.
The text of the proposed rule change
is available on the Exchange’s website at
https://nasdaqbx.cchwallstreet.com/, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
1. Purpose
The Exchange operates on the ‘‘takermaker’’ model, whereby it generally
pays credits to members that take
liquidity and charges fees to members
that provide liquidity. Currently, the
Exchange has a schedule, at Equity 7,
Section 118(a), which consists of several
different credits that it provides for
orders in securities priced at $1 or more
per share that access liquidity on the
Exchange and several different charges
that it assesses for orders in such
securities that add liquidity on the
Exchange. It also has a program, at
Equity 7, Section 118(f), to reward those
of its members that make significant
contributions to the market.
Over the course of the last few
months, the Exchange has experimented
with various reformulations of its
pricing schedule with the aim of
increasing activity on the Exchange,
improving market quality, and
increasing market share.3 Although
3 See Securities Exchange Act Release No. 34–
87271 (October 10, 2019), 84 FR 55621 (October 17,
2019) (SR–BX–2019–035); Securities Exchange Act
Release No. 34–87093 (September 24, 2019), 84 FR
57530 (October 25, 2019) (SR–BX–2019–031);
Securities Exchange Act Release No. 34–86447 (July
PO 00000
Frm 00094
Fmt 4703
Sfmt 4703
70239
these changes have met with some
success, the Exchange has yet to achieve
the results it desires. Accordingly, the
Exchange proposes to again restate its
pricing schedule, in large part, in a
further attempt to improve the
attractiveness of the market to new and
existing participants.
Description of the Changes
Credits for Accessing Liquidity Through
the Exchange
The Exchange proposes to eliminate
its schedule of existing credits (except
as described below) and replace it with
a new schedule of credits for orders in
securities that remove liquidity from the
Exchange (the ‘‘New Credits’’).
Generally speaking, the proposed New
Credits will be higher than the existing
credits for orders in Tape C and lower
than the existing credits for orders in
securities in Tapes A and B.4 The
proposed New Credits for orders in
securities in all Tapes also will no
longer be tied to threshold levels of
liquidity removal activity in securities
in Tape C. The Exchange believes that
higher overall credits for orders in
securities in Tape C will incentivize
members to increase their liquidity
removal activity in securities in Tape C.
Meanwhile, eliminating the Tape C
removal activity requirement from the
qualifying criteria for credits for orders
in securities in all Tapes will render
those credits easier for members to
attain, even as the amounts of those
credits decrease for securities in Tapes
A and B.
Specifically, the Exchange proposes to
adopt the following New Credits:
• A $0.0029 per share executed credit
for orders in securities in Tapes A and
B and a $0.0028 per share executed
credit for orders in securities in Tape C
that access liquidity (excluding orders
with Midpoint pegging and excluding
orders that receive price improvement
and execute against an order with a
24, 2019); 84 FR 36989 (July 30, 2019) (SR–BX–
2019–026); Securities Exchange Act Release No. 34–
85912 (May 22, 2019); 84 FR 24834 (May 29, 2019)
(SR–BX–2019–013).
4 Whereas the highest credit under the existing
schedule (for a member that adds liquidity equal to
or exceeding an average daily volume of 50,000
shares in a month) is $0.0031 per share executed
for orders in securities in Tapes A and B and the
lowest credit is $0.0018 per share executed, the top
such credit in the proposed schedule will be
$0.0029 per share executed and the lowest credit
will be $0.0015 per share executed. And whereas
the highest credit under the existing schedule (for
a member that adds liquidity equal to or exceeding
an average daily volume of 50,000 shares in a
month) is $0.0017 per share executed for orders in
securities in Tape C and the lowest credit is $0.0005
per share executed, the top such credit in the
proposed schedule will be $0.0028 per share
executed and the lowest will be $0.0014 per share
executed.
E:\FR\FM\20DEN1.SGM
20DEN1
]]>Agencies
[Federal Register Volume 84, Number 245 (Friday, December 20, 2019)]
[Notices]
[Pages 70235-70239]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-27460]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87765; File No. SR-CBOE-2019-117]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Relating
To Amend Rule 5.72 To Eliminate the Requirement That Leg Prices Be
Submitted Prior to the Time a Complex FLEX Order is Represented in an
Open Outcry FLEX Auction
December 16, 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 December 6, 2019, Cboe Exchange, Inc. (the ``Exchange'' or
``Cboe Options'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I
and II below, which Items have been prepared by the Exchange. The
Exchange filed the proposal as a ``non-controversial'' proposed rule
change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule
19b-4(f)(6) thereunder.\4\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to amend Rule 5.72. The text of the proposed rule change is provided
below.
(additions are italics; deletions are [bracketed])
* * * * *
Rules of Cboe Exchange, Inc.
* * * * *
Rule 5.72. FLEX Trading
(a) No change.
[[Page 70236]]
(b) FLEX Orders. A FLEX Option series is only eligible for trading
if a FLEX Trader (the ``Submitting FLEX Trader'') (i) submits a FLEX
Order for that series into an electronic FLEX Auction pursuant to
paragraph (c) of this Rule, (ii) represents the FLEX Order in an open
outcry FLEX Auction pursuant to paragraph (d) of this Rule, or (iii)
submits the FLEX Order to a FLEX AIM or SAM Auction pursuant to Rule
5.73 or 5.74, respectively.
(1) No change.
(2) Complex FLEX Order. A FLEX Order for a FLEX Option complex
strategy submitted to the System must satisfy the criteria for a
complex FLEX Order set forth in Rule 5.70(b) and include size, side of
the market, and a net debit or credit price[, and a bid or offer price
for each leg of the FLEX Order, which leg prices must add together to
equal the net price]. Additionally, each leg of the FLEX Option complex
strategy must include all terms for a FLEX Option series set forth in
Rule 4.21 (including that a non-FLEX Option series with identical terms
is not listed for trading), subject to the order entry requirements set
forth in Rule 5.7.
(A) A complex FLEX Order submitted into the System for an
electronic FLEX Auction pursuant to paragraph (c) below must include a
bid or offer price for each leg, which leg prices must add together to
equal the net price.
(B) A complex FLEX Order submitted into the System prior to
representation in an open outcry FLEX Auction pursuant to paragraph (d)
below may include a bid or offer price on one or more of the legs
(subject to a FLEX Trader's responsibilities pursuant to Rule 5.91 and
Chapter 9). The execution leg prices must be entered or modified, as
necessary, via PAR following execution of the order, which prices must
add together to equal the net execution price.
* * * * *
The text of the proposed rule change is also available on the
Exchange's website (https://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), 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 Exchange proposes to amend Rule 5.72(b) regarding the
information required in a FLEX Order \5\ for a FLEX Option complex
strategy submitted to the System for execution in an open outcry FLEX
Auction.\6\ A FLEX Option series is only eligible for trading if a FLEX
Trader (the ``Submitting FLEX Trader'') submits a FLEX Order for that
series into an electronic FLEX Auction pursuant to Rule 5.72(c) or
represents the FLEX Order in an open outcry FLEX Auction pursuant to
Rule 5.72(d).\7\ Currently, Rule 5.72(b) provides that a FLEX Order for
a FLEX Option complex strategy submitted to the System must satisfy the
criteria for a complex FLEX Order set forth in Rule 5.70(b) \8\ and
include size, side of the market, a net debit or credit price, and a
bid or offer price for each leg of the FLEX Order, which leg prices
must add together to equal that net price. This applies to complex FLEX
Orders submitted for both electronic and open outcry execution.
---------------------------------------------------------------------------
\5\ A ``FLEX Order'' is an order submitted in a FLEX Option. See
Rule 5.70(a). A ``FLEX Option'' means a flexible exchange option.
See Rule 1.1.
\6\ See Rule 5.72(d) for a description of the open outcry FLEX
Auction process.
\7\ See Rule 5.72(b). A FLEX Option series may also be eligible
for trading if the Submitting FLEX Trader submits the FLEX Order to
a FLEX Automated Improvement Mechanism auction or FLEX Solicitation
Auction Mechanism auction pursuant to Rule 5.73 or 5.74,
respectively.
\8\ Rule 5.70(b) requires each leg of a complex FLEX Order to:
(1) be for a FLEX Option series authorized for FLEX trading with the
same underlying equity security or index; (2) must have the same
exercise style (American or European); and (3) for a FLEX Index
Option, may have a different settlement type (a.m.-settled or p.m.-
settled), except each leg must have the same settlement type if
designated as Asian-settled or Cliquet-settled.
---------------------------------------------------------------------------
The proposed rule change removes the requirement that a FLEX Order
submitted into the System prior to representation in an open outcry
FLEX Auction include leg prices at the time of order submission.\9\
Specifically, proposed Rule 5.72(b)(2)(B) states a complex FLEX Order
submitted into the System prior to representation in an open outcry
FLEX Auction pursuant to paragraph (d) of Rule 5.72 may include a bid
or offer price on one or more of the legs (subject to a FLEX Trader's
responsibilities pursuant to Rule 5.91 (which describes
responsibilities of a floor broker) and Chapter 9 (which describes
obligations on Trading Permit Holders that do business with the
public)). The execution leg prices must be entered or modified, as
necessary, via PAR following execution of the order, which prices must
add together to equal the net execution price.
---------------------------------------------------------------------------
\9\ The proposed rule change has no impact on complex FLEX
Orders submitted for electronic execution. The proposed rule change
moves the requirement that a complex FLEX Order submitted into the
System for an electronic FLEX Auction pursuant to Rule 5.72(c)
include a bid or offer price for each leg, which leg prices must add
together to equal the net price, to proposed Rule 5.72(b)(2)(A).
---------------------------------------------------------------------------
When a floor broker (which is the Submitting FLEX Trader with
respect to open outcry FLEX trading) receives an order from a customer,
the floor broker must systematize the terms of that order, including
any limit price (which is the net price with respect to a complex
order).\10\ As noted above, current Rule 5.72(b)(2) requires a
Submitting FLEX Trader (i.e., a floor broker with respect to open
outcry trading) to systematize prices of all legs of a complex order
upon submission. The Exchange imposed this requirement for both
electronic and open outcry FLEX orders for consistency within the
Rules.
---------------------------------------------------------------------------
\10\ See Rule 5.7(f) (which requires systemization of the terms
of an order, which would include the limit price if a limit order);
see also Rule 5.6(b) (which defines a ``limit order'' as an order to
buy or sell a stated number of option contracts at a specified price
or better). Customers that trade complex limit orders generally only
provide a limit price for the net price, as they are ultimately
looking for execution of the entire package to occur at a certain
price (or better). However, it is possible (although uncommon) that
a customer may provide a limit price for one or more of the legs,
which the floor broker would also be required to systematize upon
entry as a term of the order. In addition to the definition of a
limit order, which may not trade at a price worse than the limit
price, floor brokers are required to use due diligence to execute an
order at the best prices available, as well as in accordance with
the rules (including the definition of a limit order) and general
floor broker responsibilities. See Rule 5.91(a); see also Rule
5.91(c) (which provides that an order entrusted to a floor broker is
considered not held, which (as defined in Rule 5.6(c)) gives a floor
broker discretion as to the price and time at which an order is to
be executed, subject to a client's specified instruction).
---------------------------------------------------------------------------
Additionally, the Exchange believed this requirement to be
appropriate due to the lack of electronic leg markets in FLEX options.
In the non-FLEX market, there is no requirement to systematize leg
prices upon submission of a complex order. In a non-FLEX market, there
is a book and a national best bid or offer, and as a result, the System
has a benchmark to use to determine execution leg prices based on the
net
[[Page 70237]]
execution price of a complex order (which leg prices may not be outside
of the best prices of orders and quotes in the book for those legs).
This is not the case in the FLEX market, in which there is no market in
the leg series of complex orders that the System can use to calculate
appropriate execution prices of the legs of a complex strategy (for
which there are countless combinations of prices). Therefore, the
Exchange believed requiring the leg prices to be input upon submission
of a complex FLEX order would provide the System with this benchmark
information to use when determining leg execution prices based on the
net execution price. Because of the automatic execution of an
electronic FLEX order following the electronic FLEX auction, which
auction is based on the net execution price, the Exchange continues to
believe the requirement to input leg prices upon submission of an order
to an electronic FLEX auction is appropriate. However, in open outcry
FLEX trading (as well as open outcry non-FLEX trading), the FLEX
auction process functions as a price negotiation through which the net
execution price, as well as the leg execution prices (that add up to
that net execution price) are determined. Since the open outcry FLEX
Auction process can be used to determine leg prices for a complex FLEX
order after the parties agree to a net execution price, the Exchange
believes it is reasonable to permit a Submitting FLEX Trader to input
leg prices into the System either upon submission of a complex FLEX
Order (and adjusted as necessary following execution), or only
following execution. If a Submitting FLEX Trader includes leg prices in
a complex FLEX Order upon submission of the order, the execution prices
of those legs may be modified following the auction (subject to any
limit price for a leg as instructed by a customer), as long as they add
up to the net execution price.
The proposed rule change permits a Submitting FLEX Trader to
continue to input those leg prices upon submission of the order and
modify them as necessary following execution, or input them after
execution. The proposed rule change is not modifying how complex FLEX
Orders may be executed in open outcry, or the execution information
that must be provided to the Exchange. Any leg prices input upon
systematization of an order are visible only to the FLEX Trader on its
PAR workstation. Prior to representing a complex order to the trading
crowd, a FLEX Trader will generally request a market from the trading
crowd. FLEX Traders (generally market-makers) in the trading crowd will
respond with a market for the net price. Market-makers price the orders
and the legs based on their own pricing models--they do not know the
net limit price or the leg price of the systematized order, as a floor
broker does not announce the leg prices when it represents the order on
the trading floor. Once the crowd agrees on a net price, it then
negotiates prices for the legs, which the Submitting FLEX Trader will
input (or update, if applicable) into the order record on its PAR
workstation. Therefore, whether a FLEX Trader inputs leg prices before
an execution (and modifies them as necessary after execution to reflect
floor negotiations during the open outcry auction (if necessary), or
only inputs the execution leg prices after execution, has no impact on
the open outcry FLEX auction or the prices at which FLEX complex orders
(and the prices of the legs of those orders) trade. The proposed rule
change is merely modifying the time at which FLEX Traders may provide
the information to the Exchange.
The Exchange will issue an Exchange Notice announcing the
implementation date for the proposed rule change, which date the
Exchange expects to be within the next two weeks. This will permit the
Exchange to implement the proposed rule change within its system and
provide sufficient notice of the change and its related requirements to
Trading Permit Holders.
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 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 the proposed rule change will
remove impediments to and perfect the mechanism of a free and open
market by providing Submitting FLEX Traders with the flexibility to
input leg prices of complex strategies either upon entry of a complex
FLEX Order or following execution. The Exchange believes this may lead
to more efficient open outcry executions on behalf of a floor broker's
customer, as a Submitting FLEX Trader will not be required to take the
time to input leg prices upon submission of the order and then modify
them after execution to reflect these negotiations, which ultimately
benefits investors (as further discussed below). As noted above,
because any leg prices of a complex FLEX order input upon
systematization are only known to the Submitting FLEX Trader and not
known to any other person in the trading crowd, the Exchange believes
the proposed rule change will have no impact on the manner in which
complex FLEX Orders are negotiated and executed in open outcry. The
proposed rule change is not modifying how complex FLEX Orders may be
executed in open outcry, or the information that Submitting FLEX
Traders must provide to the Exchange. The proposed rule change is
merely modifying the time at which Submitting FLEX Traders may provide
certain information to the Exchange.
The Exchange believes the proposed rule change will protect
investors, because it will permit a floor broker to request a market
and execute a customer's order in open outcry in a more timely fashion.
FLEX orders may include a substantial number of legs (they regularly
include more than ten legs, but may include up to 100 legs). Inputting
leg prices for a large number of legs may be a time-consuming exercise
(and as noted above, it is ultimately unnecessary prior to an open
outcry FLEX auction \14\ given the negotiations that occur during such
an auction), which may delay execution of the customer's order and
potentially miss an opportunity for execution at prices based on then-
current market conditions. While the proposed rule change has virtually
no impact on other members of the trading crowd, the proposed rule
change provides a floor
[[Page 70238]]
broker with flexibility that may result in a timelier execution of its
customer's FLEX order.
---------------------------------------------------------------------------
\14\ This is subject to a floor broker's general obligation to
adhere to its customers' instructions. See supra note 10.
---------------------------------------------------------------------------
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 that the proposed rule change 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 to all
Submitting FLEX Traders that represent complex FLEX Orders (i.e., floor
brokers) in open outcry in the same manner. All Submitting FLEX Traders
will have the option to input leg prices on a complex FLEX Order upon
submission of the order to an open outcry FLEX Auction, or following
execution of that FLEX Order. As noted above, because the remainder of
the trading crowd does not currently know the leg prices systematized
by the Submitting FLEX Trader, the proposed rule change will have
virtually no impact on other market participants. The proposed rule
change is not modifying the information that FLEX Traders must provide
to the Exchange--it is merely modifying the time at which FLEX Traders
may provide the information to the Exchange. The Exchange believes
applying the proposed rule change to open outcry FLEX auctions but not
electronic FLEX auctions is reasonable given the ability for the
trading crowd to negotiate the leg prices in open outcry, while the
System has no ability to price the legs based on the net execution
price without an electronic leg market.
The Exchange does not believe that the proposed rule change will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act, because it
relates solely to the timing of the input of leg prices of FLEX Orders
that may be executed on the Exchange. The proposed rule change merely
provides Submitting FLEX Traders with flexibility regarding when they
may input leg prices for complex FLEX Orders submitted for open outcry
execution--either upon submission of the order or following execution
of the order. The proposed rule change will have no impact on how, or
the prices at which, a complex FLEX Order may execute in an open outcry
FLEX Auction.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \15\ and Rule 19b-
4(f)(6) thereunder.\16\
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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \17\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \18\ 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 requested that the Commission waive the 30-day operative delay so
that the proposal may become operative upon filing. The Exchange stated
that it believes, among other things, that waiver of the operative
delay will permit FLEX Traders to take advantage of the proposed
flexibility and the potential for more efficient open outcry FLEX
executions as soon as possible, which it believes will ultimately
benefit customers of floor brokers.
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\17\ 17 CFR 240.19b-4(f)(6).
\18\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission believes that waiver of the operative delay is
appropriate because, as the Exchange stated, the rule change is not
modifying the information that a Submitting FLEX Trader must provide to
Exchange, but only the time at which such information may be provided
to the Exchange and is not changing the way a FLEX Order is executed in
an open outcry FLEX auction. The rule proposal also makes clear that if
one or more of the legs is submitted with a limit price the Submitting
FLEX Trader must enter the leg prices upon entry of the terms of the
order. For these reasons, the Commission believes that waiving the 30-
day operative delay is consistent with the protection of investors and
the public interest. Accordingly, the Commission designates the
proposed rule change to be operative upon filing.\19\
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\19\ 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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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CBOE-2019-117 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-CBOE-2019-117. 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
[[Page 70239]]
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-CBOE-2019-117 and should be
submitted on or before January 10, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-27460 Filed 12-19-19; 8:45 am]
BILLING CODE 8011-01-P
