Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Opening Process for Simple Orders, 7433-7436 [2021-01833]
Download as PDF
<![CDATA[
Federal Register / Vol. 86, No. 17 / Thursday, January 28, 2021 / Notices
upon filing. Waiver of the operative
delay will immediately permit series to
open for trading on the Exchange when
those series are already open for trading
on other options exchanges pursuant
their respective rules, and provide
Users’ orders that are otherwise resting
in the Queuing Book and awaiting
execution with the ability to get into the
market for potential execution, thereby
putting such Users on equal footing
with other market participants as soon
as possible. In addition, the proposal
automates an aspect of the opening
process that the Exchange currently has
the authority to perform manually, and
provides the Exchange with the same
flexibility as other exchanges to
determine appropriate maximum
opening widths. Therefore, the
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest. The Commission hereby
designates the proposed rule change to
be operative upon filing.28
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CBOE–2021–005 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.
28 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
VerDate Sep<11>2014
17:16 Jan 27, 2021
Jkt 253001
All submissions should refer to File
Number SR–CBOE–2021–005. 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 20549–1090 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–2021–005 and
should be submitted on or before
February 18, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.29
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–01834 Filed 1–27–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90969; File No. SR–
CboeEDGX–2021–005]
Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend Its
Opening Process for Simple Orders
January 22, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
17 CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
notice is hereby given that on January
11, 2021, 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 ‘‘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 EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX Options’’)
proposes to amend its opening process
for simple orders. The text of the
proposed rule change is provided in
Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
options/regulation/rule_filings/edgx/),
at the Exchange’s Office of the
Secretary, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
Rule 21.7 regarding its opening process
for simple orders. Currently, following
the occurrence of an opening rotation
trigger pursuant to Rule 21.7(d), the
System conducts an opening rotation for
an option series. Following the opening
rotation trigger, the System conducts the
Maximum Composite Width Check
pursuant to Rule 21.7(e)(1) to determine
29
1 15
PO 00000
Frm 00081
Fmt 4703
Sfmt 4703
7433
3 15
4 17
E:\FR\FM\28JAN1.SGM
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
28JAN1
7434
Federal Register / Vol. 86, No. 17 / Thursday, January 28, 2021 / Notices
if a series is eligible to open. If the
Composite Market 5 of a series is not
crossed, and the Composite Width 6 of
the series is less than or equal to the
Maximum Composite Width (as defined
in Rule 21.7(a)), the series is eligible to
open. Additionally, if the Composite
Market of a series is not crossed, and the
Composite Width of the series is greater
than the Maximum Composite Width,
but there are (i) no non-M Capacity (a)
market orders or (b) buy (sell) limit
orders with prices higher (lower) than
the Composite Market midpoint and (ii)
no orders or quotes marketable against
each other, the series is eligible to open.
Once a series become eligible to open,
the System conducts the opening
auction for the series (i.e., determines
the opening trade price pursuant to Rule
21.7(e)(2) and opens the series pursuant
to Rule 21.7(e)(3)). The Exchange may
also determine to compel a series to
open in the interest of fair and orderly
markets, including if the opening width
is wider than the Maximum Composite
Width, pursuant to Rule 21.7(h).
Currently, if a series cannot satisfy
these conditions described above (and
thus is not eligible to open), the series
is ineligible to open.7 When that occurs,
the Queuing Period 8 for the series
continues (including the dissemination
of opening auction updates) until the
5 The term ‘‘Composite Market’’ means the market
for a series comprised of (1) the higher of the thencurrent best appointed Market-Maker bulk message
bid on the Exchange and the away best bid (‘‘ABB’’)
(if there is an ABB) and (2) the lower of the thencurrent best appointed Market-Maker bulk message
offer on the Exchange and the away best offer
(‘‘ABO’’) (if there is an ABO). The term ‘‘Composite
Bid (Offer)’’ means the bid (offer) used to determine
the Composite Market. See Rule 21.7(a).
6 The term ‘‘Composite Width’’ means the width
of the Composite Market (i.e., the width between
the Composite Bid and the Composite Offer) of a
series. See Rule 21.7(a).
7 See Rule 21.7(e)(1)(C). The proposed rule
change codifies in this provision that a series is not
eligible to open if there is no Composite Market or
if the Composite Market is crossed. This is true
today and implied by the current rule text. Rule
21.7(e)(1)(A) and (B) both state that the Maximum
Composite Width Check is only satisfied if the
Composite Market of a series is not crossed, and the
proposed rule change merely adds the same
language to subparagraph (C) (i.e., if the Composite
Market of a series is crossed, then neither of the
conditions in subparagraph (A) or (B) could be
satisfied, and the series would be ineligible to
open). Additionally, if there were no Composite
Market or if it were crossed, the System would be
unable to perform the Maximum Composite Width
Check, thus meaning the series could not satisfy
that check and thus would not be eligible to open.
This proposed change merely adds detail to the
Rules for additional transparency.
8 The term ‘‘Queuing Period’’ means the time
period prior to the initiation of an opening rotation
during which the System accepts orders and quotes
in the Queuing Book (the book into which Users
may submit orders for participation in the opening
rotation) for participation in the opening rotation
for the applicable trading session. See Rule 21.7(a).
VerDate Sep<11>2014
17:16 Jan 27, 2021
Jkt 253001
Maximum Composite Width Check is
satisfied or the Exchange determines to
open the series pursuant to Rule 21.7(h).
The proposed rule change adds that
such a series may open pursuant to a
forced opening as set forth in proposed
Rule 21.7(f).9 Specifically, as proposed,
if a series in an equity or exchangetraded product (‘‘ETP’’) option class 10 is
unable to open because it does not
satisfy the Maximum Composite Width
Check described above within a time
period (which the Exchange determines
for all equity and ETP option classes) 11
after the occurrence of the opening
rotation trigger for the class pursuant to
Rule 21.7(d), and the Composite Market
is not crossed, the System forces the
series to open after that time period
upon the System’s observation of an
away best bid and offer (‘‘ABBO’’) (with
a non-zero offer) 12 for the series.13 For
a series subject to a forced opening, the
opening trade price determination and
series open set forth in Rule 21.7(e)(2)
and (3) (i.e., the opening auction) do not
occur; instead, the System opens the
series without a trade. This will permit
a series to open for trading on the
Exchange if the series is open for trading
on at least one other options exchange,
even though the market for the series on
the Exchange may be wide.
The proposed change to Rule 21.7(f)
provides that in the event of a forced
opening of a series pursuant to proposed
Rule 21.7(e)(4) or a compelled opening
of a series pursuant to paragraph (h), the
System enters all of a User’s orders in
that series in the Queuing Book into the
Book in the manner set forth in current
Rule 21.7(f), unless a User instructs the
System to cancel its market orders or all
of its orders, in which case the System
enters only the non-cancelled orders
into the Book in this manner.
Specifically, they will be processed in
accordance with Rule 21.8 (as
unexecuted orders and quotes are
handled following the conclusion of the
opening rotation), which describes how
the System processes, handles, and
executes orders. If any order or quote in
the Queuing Book is marketable upon
9 The proposed forced opening process has no
impact on the modified opening auction process set
forth in Rule 21.7(j).
10 The proposed rule change is limited to series
in equity and ETP option classes because these
classes are eligible for listing on all U.S. options
exchanges.
11 See Rule 16.3 (which permits the Exchange to
announce determinations by, among other things,
notice, regulatory circular, and specification).
12 Such an ABBO would indicate that an away
exchange is open, as it would have disseminated an
opening quote.
13 The Exchange currently has a similar forced
opening after a specified amount of time for
complex order strategies. See Rule 21.20(c)(2)(C).
PO 00000
Frm 00082
Fmt 4703
Sfmt 4703
the forced opening (and the User does
not instruct the System to cancel it as
proposed), the System would execute
marketable orders subject to the priority
rules set forth in Rule 21.8. If an order
is marketable against away interest and
is eligible for routing, the System may
route the order for execution to an away
exchange. Any non-marketable order
would enter the Book or cancel, subject
to the User instructions. This proposed
change provides Users with flexibility
for automated handling of their orders
in the event a series opens with a wide
market or is otherwise manually opened
when the opening conditions may not
otherwise be standard. If a series
satisfies the Maximum Composite
Width Check prior to the System’s
observation of an ABBO for the series,
the series opens pursuant to Rule
21.7(d)(2) and (3) (i.e., the standard
opening auction process occurs for the
series). For example, suppose the
Exchange determined the ‘‘forced
opening’’ timer to be three minutes. If
the opening trigger for a series occurs at
9:30:05 Eastern time but the series does
not satisfy the Maximum Composite
Width Check after the trigger, the
System will force the series open after
9:33:05 Eastern time if it has received an
ABBO by that time. However, if the
series satisfies the Maximum Composite
Width Check at 9:32:30, the series will
open in accordance with the normal
opening auction process.
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.14 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 15 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) 16 requirement that
14 15
15 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
16 Id.
E:\FR\FM\28JAN1.SGM
28JAN1
Federal Register / Vol. 86, No. 17 / Thursday, January 28, 2021 / Notices
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 forced opening process for
simple orders will remove impediments
to and perfect the mechanism of a free
and open market and a national market
system and protect investors. The
proposed rule change will provide for
series to open for trading on the
Exchange sooner than they may open
currently, as long as they are open for
trading on other options exchanges. The
Exchange believes the proposed rule
change will benefit investors, because it
may permit these options to open
sooner and increase the times during
which investors may conduct trading in
these options. Additionally, this may
increase liquidity in the market for a
series that is otherwise open on another
options exchange. While the market on
the Exchange for a series may be wider
than the Maximum Composite Width,17
the Exchange believes it is reasonable to
open the series if it opened for trading
on another options exchange pursuant
to that exchange’s Commissionapproved rules. Options exchanges have
varying opening processes and have
made separate determinations on what
constitutes separate, reasonable opening
market widths. The Exchange believes if
other options exchanges opened a series
with a market width, it is reasonable to
open the series for trading on the
Exchange as well (as orders submitted to
other exchanges may be trading at those
widths). Since orders may not trade
outside of the disseminated NBBO
(which defines the then-current market
for the series), any orders resting in the
Queuing Book that may execute
following the forced opening will
receive protection against executions at
potentially erroneous prices.
Additionally, the proposed ability of
Users to cancel orders in the event of a
forced opening will provide Users with
additional protection. Additionally, the
Exchange believes opening series for
trading on the Exchange that are open
for trading on other options exchanges
will put Exchange Users on equal
footing with other market participants,
as it will provide Users’ orders that are
otherwise resting in the Queuing Book
and awaiting execution with the ability
to get into the market for potential
execution.
The Exchange currently has the
authority to deviate from the standard
opening process, including to
17 The Exchange notes pursuant to Rule
21.7(e)(1)(B), there are currently instances in which
the Exchange will open for trading despite the
Composite Market Width being larger than the
Maximum Composite Width.
VerDate Sep<11>2014
17:16 Jan 27, 2021
Jkt 253001
temporarily increase the Maximum
Composite Width amounts (i.e., widen
the permissible opening market) and to
compel a series open, even if the
Maximum Composite Width check is
not satisfied, but that may only happen
manually if the Exchange determines it
is necessary in the interests of a fair and
orderly market.18 Currently, if a series is
open on another exchange but not on
the Exchange, the Exchange generally
manually increases the Maximum
Composite Width for the series until the
series opens. Manually increasing the
Maximum Composite Width for a series
until the series open is a different
manual process than compelling the
series to open, but ultimately achieves
the same result of causing a series that
does not satisfy the Maximum
Composite Width check to otherwise
open. The Exchange believes it is in the
interests of a fair and orderly market to
deviate from the opening process to
systematically force a series to open,
despite a wide Exchange market, if the
series is open for trading on another
exchange to provide investors with
orders in that series resting on the
Exchange’s Queuing Book to have the
same execution opportunities as other
investors who submitted orders to other
options exchanges with different
opening conditions. The proposed rule
change is consistent with this authority
and creates an automated compelled
opening in certain circumstances to
replace the manual process currently
used. This will benefit investors by
providing additional transparency to the
Rules regarding when a series may open
despite not satisfying the Maximum
Composite Width check as well as
remove impediments to and perfect the
mechanism of a free and open market
and a national market system by
automating an otherwise manual
process.
The Exchange believes the proposed
rule change to permit Users to give the
System a standing instruction regarding
how to handle their orders when a
forced or manually compelled (for
simple orders) opening of series occurs
will benefit investors, as it will give
them an additional tool to manage their
orders in connection with the opening
of series. Users may currently cancel
any of their orders resting in the
Queuing Book prior to the opening of a
series, and they may cancel any orders
that do not execute at the open once
those orders are in the Book or COB, as
applicable. Because the Exchange
market may be wider in these situations,
18 See Rule 21.7(h); see also definition of
Maximum Composite Width and Opening Collar in
Rule 21.7(a).
PO 00000
Frm 00083
Fmt 4703
Sfmt 4703
7435
the Exchange believes it is appropriate
to provide Users with the ability to
cancel market orders so they don’t
execute at the wider market prices once
in the Book or cancel all of their orders
if they prefer.
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 all Users may trade in any
series that opens subject to the proposed
forced opening process. The Exchange
believes it is appropriate to limit the
forced opening to equity and ETP
options, as those may be multiply listed
on exchanges. Additionally, all Users
will have the opportunity to instruct the
System to cancel its market orders or all
open orders in the event of a forced or
otherwise manual opening. Cancellation
of some or all of a User’s orders in the
event of such an opening would be
voluntary and completely within the
User’s discretion.
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 the proposed forced opening
process will permit series to open on the
Exchange that are otherwise open for
trading on other options Exchange,
which may increase liquidity and
competition in those series sooner.
Additionally, the Exchange believes
opening series for trading on the
Exchange that are open for trading on
other options exchanges will put
Exchange Users on equal footing with
other market participants, as it will
provide Users’ orders that are otherwise
resting in the Queuing Book and
awaiting execution with the ability to
get into the market for potential
execution. The proposed flexibility for
Users to instruct the System how to
handle their orders in the event of a
forced or manual opening applies only
to how a Users’ orders on the Exchange
will be handled in such a circumstance.
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.
E:\FR\FM\28JAN1.SGM
28JAN1
7436
Federal Register / Vol. 86, No. 17 / Thursday, January 28, 2021 / Notices
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has designated this rule
filing as non-controversial under
Section 19(b)(3)(A) 19 of the Act and
Rule 19b–4(f)(6) 20 thereunder. Because
the proposed rule change does not: (i)
Significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
for 30 days from the date on which it
was filed, or such shorter time as the
Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act and Rule 19b–
4(f)(6) thereunder.21
A proposed rule change filed under
Rule 19b–4(f)(6) 22 normally does not
become operative for 30 days after the
date of filing. However, pursuant to
Rule 19b–4(f)(6)(iii),23 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 so that
the proposal may become operative
upon filing. Waiver of the operative
delay will immediately permit series to
open for trading on the Exchange when
those series are already open for trading
on other options exchanges pursuant
their respective rules, and provide
Users’ orders that are otherwise resting
in the Queuing Book and awaiting
execution with the ability to get into the
market for potential execution, thereby
putting such Users on equal footing
with other market participants as soon
as possible. In addition, the proposal
automates an aspect of the opening
process that the Exchange currently has
the authority to perform manually.
Therefore, the Commission believes that
waiving the 30-day operative delay is
consistent with the protection of
investors and the public interest. The
Commission hereby designates the
proposed rule change to be operative
upon filing.24
19 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
21 In addition, Rule 19b–4(f)(6)(iii) requires the
Exchange 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
filing of the proposed rule change, or such shorter
time as designated by the Commission. The
Exhange has satisfied this requirement.
22 Id.
23 17 CFR 240.19b–4(f)(6)(iii).
24 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).
20 17
VerDate Sep<11>2014
17:16 Jan 27, 2021
Jkt 253001
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CboeEDGX–2021–005 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CboeEDGX–2021–005. 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 20549–1090 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.
PO 00000
Frm 00084
Fmt 4703
Sfmt 4703
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–CboeEDGX–2021–005 and
should be submitted on or before
February 18, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–01833 Filed 1–27–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–563, OMB Control No.
3235–0626]
Proposed Collection; Comment
Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of Investor
Education and Advocacy,
Washington, DC 20549–0213.
Extension:
Rule 17g–3
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the existing collection of information
provided for in Rule 17g–3 under the
Securities Exchange Act of 1934 (15
U.S.C. 78a et seq.).1 The Commission
plans to submit this existing collection
of information to the Office of
Management and Budget for extension
and approval.
Rule 17g–3 contains certain reporting
requirements for NRSROs including
financial statements and information
concerning its financial condition that
the Commission, by rule, may prescribe
as necessary or appropriate in the public
interest or for the protection of
investors. Currently, there are 9 credit
rating agencies registered as NRSROs
with the Commission. The Commission
estimates that the total burden for
respondents to comply with Rule 17g–
3 is 3,285 hours.
Written comments are invited on: (a)
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the
25 17
1 See
E:\FR\FM\28JAN1.SGM
CFR 200.30–3(a)(12).
17 CFR 240.17g–1 and 17 CFR 249b.300.
28JAN1
]]>Agencies
[Federal Register Volume 86, Number 17 (Thursday, January 28, 2021)]
[Notices]
[Pages 7433-7436]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-01833]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90969; File No. SR-CboeEDGX-2021-005]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Its Opening Process for Simple Orders
January 22, 2021.
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 January 11, 2021, Cboe EDGX Exchange, Inc. (the ``Exchange'' or
``EDGX'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and
II, below, which Items have been prepared by the Exchange. The Exchange
filed the proposal as a ``non-controversial'' proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX Options'')
proposes to amend its opening process for simple orders. The text of
the proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (https://markets.cboe.com/us/options/regulation/rule_filings/edgx/), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 21.7 regarding its opening
process for simple orders. Currently, following the occurrence of an
opening rotation trigger pursuant to Rule 21.7(d), the System conducts
an opening rotation for an option series. Following the opening
rotation trigger, the System conducts the Maximum Composite Width Check
pursuant to Rule 21.7(e)(1) to determine
[[Page 7434]]
if a series is eligible to open. If the Composite Market \5\ of a
series is not crossed, and the Composite Width \6\ of the series is
less than or equal to the Maximum Composite Width (as defined in Rule
21.7(a)), the series is eligible to open. Additionally, if the
Composite Market of a series is not crossed, and the Composite Width of
the series is greater than the Maximum Composite Width, but there are
(i) no non-M Capacity (a) market orders or (b) buy (sell) limit orders
with prices higher (lower) than the Composite Market midpoint and (ii)
no orders or quotes marketable against each other, the series is
eligible to open. Once a series become eligible to open, the System
conducts the opening auction for the series (i.e., determines the
opening trade price pursuant to Rule 21.7(e)(2) and opens the series
pursuant to Rule 21.7(e)(3)). The Exchange may also determine to compel
a series to open in the interest of fair and orderly markets, including
if the opening width is wider than the Maximum Composite Width,
pursuant to Rule 21.7(h).
---------------------------------------------------------------------------
\5\ The term ``Composite Market'' means the market for a series
comprised of (1) the higher of the then-current best appointed
Market-Maker bulk message bid on the Exchange and the away best bid
(``ABB'') (if there is an ABB) and (2) the lower of the then-current
best appointed Market-Maker bulk message offer on the Exchange and
the away best offer (``ABO'') (if there is an ABO). The term
``Composite Bid (Offer)'' means the bid (offer) used to determine
the Composite Market. See Rule 21.7(a).
\6\ The term ``Composite Width'' means the width of the
Composite Market (i.e., the width between the Composite Bid and the
Composite Offer) of a series. See Rule 21.7(a).
---------------------------------------------------------------------------
Currently, if a series cannot satisfy these conditions described
above (and thus is not eligible to open), the series is ineligible to
open.\7\ When that occurs, the Queuing Period \8\ for the series
continues (including the dissemination of opening auction updates)
until the Maximum Composite Width Check is satisfied or the Exchange
determines to open the series pursuant to Rule 21.7(h). The proposed
rule change adds that such a series may open pursuant to a forced
opening as set forth in proposed Rule 21.7(f).\9\ Specifically, as
proposed, if a series in an equity or exchange-traded product (``ETP'')
option class \10\ is unable to open because it does not satisfy the
Maximum Composite Width Check described above within a time period
(which the Exchange determines for all equity and ETP option classes)
\11\ after the occurrence of the opening rotation trigger for the class
pursuant to Rule 21.7(d), and the Composite Market is not crossed, the
System forces the series to open after that time period upon the
System's observation of an away best bid and offer (``ABBO'') (with a
non-zero offer) \12\ for the series.\13\ For a series subject to a
forced opening, the opening trade price determination and series open
set forth in Rule 21.7(e)(2) and (3) (i.e., the opening auction) do not
occur; instead, the System opens the series without a trade. This will
permit a series to open for trading on the Exchange if the series is
open for trading on at least one other options exchange, even though
the market for the series on the Exchange may be wide.
---------------------------------------------------------------------------
\7\ See Rule 21.7(e)(1)(C). The proposed rule change codifies in
this provision that a series is not eligible to open if there is no
Composite Market or if the Composite Market is crossed. This is true
today and implied by the current rule text. Rule 21.7(e)(1)(A) and
(B) both state that the Maximum Composite Width Check is only
satisfied if the Composite Market of a series is not crossed, and
the proposed rule change merely adds the same language to
subparagraph (C) (i.e., if the Composite Market of a series is
crossed, then neither of the conditions in subparagraph (A) or (B)
could be satisfied, and the series would be ineligible to open).
Additionally, if there were no Composite Market or if it were
crossed, the System would be unable to perform the Maximum Composite
Width Check, thus meaning the series could not satisfy that check
and thus would not be eligible to open. This proposed change merely
adds detail to the Rules for additional transparency.
\8\ The term ``Queuing Period'' means the time period prior to
the initiation of an opening rotation during which the System
accepts orders and quotes in the Queuing Book (the book into which
Users may submit orders for participation in the opening rotation)
for participation in the opening rotation for the applicable trading
session. See Rule 21.7(a).
\9\ The proposed forced opening process has no impact on the
modified opening auction process set forth in Rule 21.7(j).
\10\ The proposed rule change is limited to series in equity and
ETP option classes because these classes are eligible for listing on
all U.S. options exchanges.
\11\ See Rule 16.3 (which permits the Exchange to announce
determinations by, among other things, notice, regulatory circular,
and specification).
\12\ Such an ABBO would indicate that an away exchange is open,
as it would have disseminated an opening quote.
\13\ The Exchange currently has a similar forced opening after a
specified amount of time for complex order strategies. See Rule
21.20(c)(2)(C).
---------------------------------------------------------------------------
The proposed change to Rule 21.7(f) provides that in the event of a
forced opening of a series pursuant to proposed Rule 21.7(e)(4) or a
compelled opening of a series pursuant to paragraph (h), the System
enters all of a User's orders in that series in the Queuing Book into
the Book in the manner set forth in current Rule 21.7(f), unless a User
instructs the System to cancel its market orders or all of its orders,
in which case the System enters only the non-cancelled orders into the
Book in this manner. Specifically, they will be processed in accordance
with Rule 21.8 (as unexecuted orders and quotes are handled following
the conclusion of the opening rotation), which describes how the System
processes, handles, and executes orders. If any order or quote in the
Queuing Book is marketable upon the forced opening (and the User does
not instruct the System to cancel it as proposed), the System would
execute marketable orders subject to the priority rules set forth in
Rule 21.8. If an order is marketable against away interest and is
eligible for routing, the System may route the order for execution to
an away exchange. Any non-marketable order would enter the Book or
cancel, subject to the User instructions. This proposed change provides
Users with flexibility for automated handling of their orders in the
event a series opens with a wide market or is otherwise manually opened
when the opening conditions may not otherwise be standard. If a series
satisfies the Maximum Composite Width Check prior to the System's
observation of an ABBO for the series, the series opens pursuant to
Rule 21.7(d)(2) and (3) (i.e., the standard opening auction process
occurs for the series). For example, suppose the Exchange determined
the ``forced opening'' timer to be three minutes. If the opening
trigger for a series occurs at 9:30:05 Eastern time but the series does
not satisfy the Maximum Composite Width Check after the trigger, the
System will force the series open after 9:33:05 Eastern time if it has
received an ABBO by that time. However, if the series satisfies the
Maximum Composite Width Check at 9:32:30, the series will open in
accordance with the normal opening auction process.
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.\14\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \15\ 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) \16\ requirement that
[[Page 7435]]
the rules of an exchange not be designed to permit unfair
discrimination between customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
\16\ Id.
---------------------------------------------------------------------------
In particular, the Exchange believes the proposed forced opening
process for simple orders will remove impediments to and perfect the
mechanism of a free and open market and a national market system and
protect investors. The proposed rule change will provide for series to
open for trading on the Exchange sooner than they may open currently,
as long as they are open for trading on other options exchanges. The
Exchange believes the proposed rule change will benefit investors,
because it may permit these options to open sooner and increase the
times during which investors may conduct trading in these options.
Additionally, this may increase liquidity in the market for a series
that is otherwise open on another options exchange. While the market on
the Exchange for a series may be wider than the Maximum Composite
Width,\17\ the Exchange believes it is reasonable to open the series if
it opened for trading on another options exchange pursuant to that
exchange's Commission-approved rules. Options exchanges have varying
opening processes and have made separate determinations on what
constitutes separate, reasonable opening market widths. The Exchange
believes if other options exchanges opened a series with a market
width, it is reasonable to open the series for trading on the Exchange
as well (as orders submitted to other exchanges may be trading at those
widths). Since orders may not trade outside of the disseminated NBBO
(which defines the then-current market for the series), any orders
resting in the Queuing Book that may execute following the forced
opening will receive protection against executions at potentially
erroneous prices. Additionally, the proposed ability of Users to cancel
orders in the event of a forced opening will provide Users with
additional protection. Additionally, the Exchange believes opening
series for trading on the Exchange that are open for trading on other
options exchanges will put Exchange Users on equal footing with other
market participants, as it will provide Users' orders that are
otherwise resting in the Queuing Book and awaiting execution with the
ability to get into the market for potential execution.
---------------------------------------------------------------------------
\17\ The Exchange notes pursuant to Rule 21.7(e)(1)(B), there
are currently instances in which the Exchange will open for trading
despite the Composite Market Width being larger than the Maximum
Composite Width.
---------------------------------------------------------------------------
The Exchange currently has the authority to deviate from the
standard opening process, including to temporarily increase the Maximum
Composite Width amounts (i.e., widen the permissible opening market)
and to compel a series open, even if the Maximum Composite Width check
is not satisfied, but that may only happen manually if the Exchange
determines it is necessary in the interests of a fair and orderly
market.\18\ Currently, if a series is open on another exchange but not
on the Exchange, the Exchange generally manually increases the Maximum
Composite Width for the series until the series opens. Manually
increasing the Maximum Composite Width for a series until the series
open is a different manual process than compelling the series to open,
but ultimately achieves the same result of causing a series that does
not satisfy the Maximum Composite Width check to otherwise open. The
Exchange believes it is in the interests of a fair and orderly market
to deviate from the opening process to systematically force a series to
open, despite a wide Exchange market, if the series is open for trading
on another exchange to provide investors with orders in that series
resting on the Exchange's Queuing Book to have the same execution
opportunities as other investors who submitted orders to other options
exchanges with different opening conditions. The proposed rule change
is consistent with this authority and creates an automated compelled
opening in certain circumstances to replace the manual process
currently used. This will benefit investors by providing additional
transparency to the Rules regarding when a series may open despite not
satisfying the Maximum Composite Width check as well as remove
impediments to and perfect the mechanism of a free and open market and
a national market system by automating an otherwise manual process.
---------------------------------------------------------------------------
\18\ See Rule 21.7(h); see also definition of Maximum Composite
Width and Opening Collar in Rule 21.7(a).
---------------------------------------------------------------------------
The Exchange believes the proposed rule change to permit Users to
give the System a standing instruction regarding how to handle their
orders when a forced or manually compelled (for simple orders) opening
of series occurs will benefit investors, as it will give them an
additional tool to manage their orders in connection with the opening
of series. Users may currently cancel any of their orders resting in
the Queuing Book prior to the opening of a series, and they may cancel
any orders that do not execute at the open once those orders are in the
Book or COB, as applicable. Because the Exchange market may be wider in
these situations, the Exchange believes it is appropriate to provide
Users with the ability to cancel market orders so they don't execute at
the wider market prices once in the Book or cancel all of their orders
if they prefer.
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 all Users may trade in
any series that opens subject to the proposed forced opening process.
The Exchange believes it is appropriate to limit the forced opening to
equity and ETP options, as those may be multiply listed on exchanges.
Additionally, all Users will have the opportunity to instruct the
System to cancel its market orders or all open orders in the event of a
forced or otherwise manual opening. Cancellation of some or all of a
User's orders in the event of such an opening would be voluntary and
completely within the User's discretion.
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 the
proposed forced opening process will permit series to open on the
Exchange that are otherwise open for trading on other options Exchange,
which may increase liquidity and competition in those series sooner.
Additionally, the Exchange believes opening series for trading on the
Exchange that are open for trading on other options exchanges will put
Exchange Users on equal footing with other market participants, as it
will provide Users' orders that are otherwise resting in the Queuing
Book and awaiting execution with the ability to get into the market for
potential execution. The proposed flexibility for Users to instruct the
System how to handle their orders in the event of a forced or manual
opening applies only to how a Users' orders on the Exchange will be
handled in such a circumstance.
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.
[[Page 7436]]
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has designated this rule filing as non-controversial
under Section 19(b)(3)(A) \19\ of the Act and Rule 19b-4(f)(6) \20\
thereunder. Because the proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6) thereunder.\21\
---------------------------------------------------------------------------
\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 17 CFR 240.19b-4(f)(6).
\21\ In addition, Rule 19b-4(f)(6)(iii) requires the Exchange 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
filing of the proposed rule change, or such shorter time as
designated by the Commission. The Exhange has satisfied this
requirement.
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) \22\ normally
does not become operative for 30 days after the date of filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\23\ 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 so that the proposal
may become operative upon filing. Waiver of the operative delay will
immediately permit series to open for trading on the Exchange when
those series are already open for trading on other options exchanges
pursuant their respective rules, and provide Users' orders that are
otherwise resting in the Queuing Book and awaiting execution with the
ability to get into the market for potential execution, thereby putting
such Users on equal footing with other market participants as soon as
possible. In addition, the proposal automates an aspect of the opening
process that the Exchange currently has the authority to perform
manually. Therefore, the Commission believes that waiving the 30-day
operative delay is consistent with the protection of investors and the
public interest. The Commission hereby designates the proposed rule
change to be operative upon filing.\24\
---------------------------------------------------------------------------
\22\ Id.
\23\ 17 CFR 240.19b-4(f)(6)(iii).
\24\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CboeEDGX-2021-005 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-CboeEDGX-2021-005. 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
20549-1090 on official business days between the hours of 10:00 a.m.
and 3:00 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. All
comments received will be posted without change. Persons submitting
comments are cautioned that we do not redact or edit personal
identifying information from comment submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-CboeEDGX-2021-005 and should
be submitted on or before February 18, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
---------------------------------------------------------------------------
\25\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-01833 Filed 1-27-21; 8:45 am]
BILLING CODE 8011-01-P
