Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating To Amend Its Opening Process for Simple Orders, 7429-7433 [2021-01834]
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Federal Register / Vol. 86, No. 17 / Thursday, January 28, 2021 / Notices
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
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.
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–C2–2021–001 and should
be submitted on or before February 18,
2021.
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:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
J. Matthew DeLesDernier,
Assistant Secretary.
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
C2–2021–001 on the subject line.
SECURITIES AND EXCHANGE
COMMISSION
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–C2–2021–001. 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
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).
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[FR Doc. 2021–01830 Filed 1–27–21; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–90967; File No. SR–CBOE–
2021–005]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating 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 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
25 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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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
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://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
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 5.31 regarding its opening process
for simple orders. Currently, following
the occurrence of an opening rotation
trigger pursuant to Rule 5.31(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 5.31(e)(1) to determine
if a series is eligible to open. If the
Composite Market 5 of a series is not
crossed, and the Composite Width 6 of
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 5.31(a).
6 The term ‘‘Composite Width’’ means the width
of the Composite Market (i.e., the width between
Continued
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the series is less than or equal to the
Maximum Composite Width (as defined
in Rule 5.31(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
5.31(e)(2) and opens the series pursuant
to Rule 5.31(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 5.31(h).
Currently, if a series cannot satisfy
these conditions described above (and
thus is not eligible to open), or if the
Composite Market of a series is crossed,
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 5.31(h). The proposed
rule change adds that such a series may
open pursuant to a forced opening as set
forth in proposed Rule 5.31(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
the Composite Bid and the Composite Offer) of a
series. See Rule 5.31(a).
7 See Rule 5.31(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.
This is true today and implied by the current rule
text. If there were no Composite Market, 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
this 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 5.31(a).
9 The proposed forced opening process has no
impact on the modified opening auction process set
forth in Rule 5.31(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.
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ETP option classes) 11 after the
occurrence of the opening rotation
trigger for the class pursuant to Rule
5.31(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 5.31(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 5.31(f)
provides that in the event of a forced
opening of a series pursuant to proposed
Rule 5.31(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 5.31(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 5.32 (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 5.32. 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
11 See Rule 1.5 (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 5.33(c)(2)(C).
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System’s observation of an ABBO for the
series, the series opens pursuant to Rule
5.31(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.
Finally, the proposed rule change
amends the definitions of ‘‘Maximum
Composite Width’’ and ‘‘Opening
Collar’’ in Rule 5.31(a). The term
‘‘Maximum Composite Width’’ means
the amount that the Composite Width of
a series may generally not be greater
than for the series to open (subject to
certain exceptions set forth in Rule
5.31(e)(1)). The term ‘‘Opening Collar’’
means the price range that establishes
limits at or inside which the System
determines the Opening Trade Price for
a series. The Opening Collar is
determined by determining the
midpoint of the Composite Market, and
adding and subtracting half of the
applicable width amount above and
below, respectively, that midpoint. The
amounts for the Maximum Composite
Width and Opening Collar each apply
on a Composite Bid basis and are
currently the same for all classes (and
the Maximum Composite Width
amounts are the same as the Opening
Collar amounts).
The Maximum Composite Width and
Opening Collar amounts are currently
specified in these defined terms. The
proposed rule change deletes these
specified amounts and instead states
that the Exchange determines each on a
class and Composite Bid basis, which
amount the Exchange may modify
during the opening auction process
(which modifications the Exchange
disseminates to all subscribes to the
Exchange’s data feeds that deliver
opening auction updates).14 The
Exchange believes having flexibility to
set these amounts is appropriate so that
it may consider the different market
models and characteristics of different
classes, as well as modify amounts in
response to then-current market
conditions. The Rules currently permit
the Exchange to modify these amounts
14 The Exchange would announce the
determinations (and any changes to those
determinations) in accordance with Rule 1.5.
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during the opening auction process
when it deems necessary to maintain a
fair and orderly opening process (which
modifications the Exchange
disseminates to all subscribers to the
Exchange’s data feeds that deliver
opening auction updates). This
proposed change merely permits the
Exchange to modify these amounts at
any time as it deems necessary and
appropriate. The Exchange notes several
options exchanges are able to change the
amounts of valid opening widths by
notice or circular and do not need to
submit a rule filing to the Commission
to do so.15
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.16 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 17 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) 18 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 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
15 See, e.g., Nasdaq Options Market (‘‘NOM’’)
Options 3, Section 8(a)(6), Cboe EDGX Options
Exchange, Inc. (‘‘EDGX’’) Rule 21.7(a) (definitions
of Maximum Composite Width and Opening
Collar); Cboe BZX Options Exchange, Inc. (‘‘BZX’’)
Rule 21.7(a) (definitions of Maximum Composite
Width and Opening Collar); Cboe C2 Exchange Inc.
(‘‘C2’’) Rule 6.11(a) (definitions of Maximum
Composite Width and Opening Collar); see also
Miami Securities Exchange, Inc. (‘‘MIAX’’) Rule
503(f)(2) (which permits MIAX to determine by
circular an acceptable range in which openings are
permissible if there is no valid width national best
bid or offer (‘‘NBBO’’)).
16 15 U.S.C. 78f(b).
17 15 U.S.C. 78f(b)(5).
18 Id.
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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,19
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
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
19 The Exchange notes pursuant to Rule
5.31(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.
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7431
orderly market.20 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,
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.
Additionally, the Exchange believes
the proposed rule change to permit the
20 See Rule 5.31(h); see also definition of
Maximum Composite Width and Opening Collar in
Rule 5.31(a).
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Exchange to determine the amounts of
the Maximum Composite Width and
Opening Collar on a class and
Composite Bid basis will remove
impediments to and perfect the
mechanism of a free and open market
and a national market system and
protect investors, because it will
provide the Exchange with flexibility to
consider the different market models
and characteristics of different classes,
and respond to then-current market
conditions. The Rules currently permit
the Exchange to modify these amounts
during the opening auction process
when it deems necessary to maintain a
fair and orderly opening process (which
modifications the Exchange
disseminates to all subscribers to the
Exchange’s data feeds that deliver
opening auction updates). This
proposed change merely permits the
Exchange to modify these amounts at
any time as it deems necessary and
appropriate. The Exchange notes several
options exchanges are able to change the
amounts of valid opening widths by
notice or circular and do not need to
submit a rule filing to the Commission
to do so, and the proposed rule change
would provide the Exchange with the
same flexibility to determine maximum
opening widths that other exchanges
have.21
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
21 See, e.g., NOM Options 3, Section 8(a)(6),
EDGX Rule 21.7(a) (definitions of Maximum
Composite Width and Opening Collar), BZX Rule
21.7(a) (definitions of Maximum Composite Width
and Opening Collar), and C2 Rule 6.11(a)
(definitions of Maximum Composite Width and
Opening Collar); see also MIAX Rule 503(f)(2)
(which permits MIAX to determine by circular an
acceptable range in which openings are permissible
if there is no valid width NBBO).
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voluntary and completely within the
User’s discretion. The Exchange
believes the proposed rule change to
determine the amounts of the Maximum
Composite Width and Opening Collar
on a class and Composite Bid basis will
not impose any burden on intramarket
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act, because the
determined amounts (by Composite Bid)
for each class will apply to all orders of
all market participants in the applicable
class in the same manner. The Exchange
believes it is appropriate to be able to
determine different amounts on a class
basis (it already determines different
amounts on a Composite Bid basis),
because it will provide the Exchange
with flexibility to consider the different
market models and characteristics of
different classes, and respond to thencurrent market conditions. The Rules
currently permit the Exchange to modify
these amounts during the opening
auction process when it deems
necessary to maintain a fair and orderly
opening process (which modifications
the Exchange disseminates to all
subscribers to the Exchange’s data feeds
that deliver opening auction updates).
This proposed change merely permits
the Exchange to modify these amounts
at any time as it deems necessary and
appropriate.
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.
The Exchange does not believe the
proposed rule change to permit the
Exchange to determine the amounts of
the Maximum Composite Width and
Opening Collar on a class and
Composite Bid basis will impose any
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burden on intermarket competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
Several options exchanges are able to
change the amounts of valid opening
widths by notice or circular and do not
need to submit a rule filing to the
Commission to do so, and the proposed
rule change would provide the
Exchange with the same flexibility to
determine maximum opening widths
that other exchanges have.22
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has designated this rule
filing as non-controversial under
Section 19(b)(3)(A) 23 of the Act and
Rule 19b–4(f)(6) 24 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.25
A proposed rule change filed under
Rule 19b–4(f)(6) 26 normally does not
become operative for 30 days after the
date of filing. However, pursuant to
Rule 19b–4(f)(6)(iii),27 the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest. The
Exchange has asked the Commission to
waive the 30-day operative delay so that
the proposal may become operative
22 See, e.g., NOM Options 3, Section 8(a)(6),
EDGX Rule 21.7(a) (definitions of Maximum
Composite Width and Opening Collar), BZX Rule
21.7(a) (definitions of Maximum Composite Width
and Opening Collar), and C2 Rule 6.11(a)
(definitions of Maximum Composite Width and
Opening Collar); see also MIAX Rule 503(f)(2)
(which permits MIAX to determine by circular an
acceptable range in which openings are permissible
if there is no valid width NBBO).
23 15 U.S.C. 78s(b)(3)(A).
24 17 CFR 240.19b–4(f)(6).
25 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.
26 Id.
27 17 CFR 240.19b–4(f)(6)(iii).
E:\FR\FM\28JAN1.SGM
28JAN1
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
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Frm 00081
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Sfmt 4703
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3 15
4 17
E:\FR\FM\28JAN1.SGM
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
28JAN1
]]>Agencies
[Federal Register Volume 86, Number 17 (Thursday, January 28, 2021)]
[Notices]
[Pages 7429-7433]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-01834]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90967; File No. SR-CBOE-2021-005]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Relating
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 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).
---------------------------------------------------------------------------
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 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://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 5.31 regarding its opening
process for simple orders. Currently, following the occurrence of an
opening rotation trigger pursuant to Rule 5.31(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 5.31(e)(1) to determine if a series is eligible to
open. If the Composite Market \5\ of a series is not crossed, and the
Composite Width \6\ of
[[Page 7430]]
the series is less than or equal to the Maximum Composite Width (as
defined in Rule 5.31(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 5.31(e)(2) and
opens the series pursuant to Rule 5.31(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 5.31(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 5.31(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 5.31(a).
---------------------------------------------------------------------------
Currently, if a series cannot satisfy these conditions described
above (and thus is not eligible to open), or if the Composite Market of
a series is crossed, 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 5.31(h). The proposed rule change adds that such a
series may open pursuant to a forced opening as set forth in proposed
Rule 5.31(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 5.31(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 5.31(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 5.31(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. This is true today and implied by the current rule
text. If there were no Composite Market, 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 this 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 5.31(a).
\9\ The proposed forced opening process has no impact on the
modified opening auction process set forth in Rule 5.31(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 1.5 (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
5.33(c)(2)(C).
---------------------------------------------------------------------------
The proposed change to Rule 5.31(f) provides that in the event of a
forced opening of a series pursuant to proposed Rule 5.31(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 5.31(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 5.32 (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 5.32. 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 5.31(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.
Finally, the proposed rule change amends the definitions of
``Maximum Composite Width'' and ``Opening Collar'' in Rule 5.31(a). The
term ``Maximum Composite Width'' means the amount that the Composite
Width of a series may generally not be greater than for the series to
open (subject to certain exceptions set forth in Rule 5.31(e)(1)). The
term ``Opening Collar'' means the price range that establishes limits
at or inside which the System determines the Opening Trade Price for a
series. The Opening Collar is determined by determining the midpoint of
the Composite Market, and adding and subtracting half of the applicable
width amount above and below, respectively, that midpoint. The amounts
for the Maximum Composite Width and Opening Collar each apply on a
Composite Bid basis and are currently the same for all classes (and the
Maximum Composite Width amounts are the same as the Opening Collar
amounts).
The Maximum Composite Width and Opening Collar amounts are
currently specified in these defined terms. The proposed rule change
deletes these specified amounts and instead states that the Exchange
determines each on a class and Composite Bid basis, which amount the
Exchange may modify during the opening auction process (which
modifications the Exchange disseminates to all subscribes to the
Exchange's data feeds that deliver opening auction updates).\14\ The
Exchange believes having flexibility to set these amounts is
appropriate so that it may consider the different market models and
characteristics of different classes, as well as modify amounts in
response to then-current market conditions. The Rules currently permit
the Exchange to modify these amounts
[[Page 7431]]
during the opening auction process when it deems necessary to maintain
a fair and orderly opening process (which modifications the Exchange
disseminates to all subscribers to the Exchange's data feeds that
deliver opening auction updates). This proposed change merely permits
the Exchange to modify these amounts at any time as it deems necessary
and appropriate. The Exchange notes several options exchanges are able
to change the amounts of valid opening widths by notice or circular and
do not need to submit a rule filing to the Commission to do so.\15\
---------------------------------------------------------------------------
\14\ The Exchange would announce the determinations (and any
changes to those determinations) in accordance with Rule 1.5.
\15\ See, e.g., Nasdaq Options Market (``NOM'') Options 3,
Section 8(a)(6), Cboe EDGX Options Exchange, Inc. (``EDGX'') Rule
21.7(a) (definitions of Maximum Composite Width and Opening Collar);
Cboe BZX Options Exchange, Inc. (``BZX'') Rule 21.7(a) (definitions
of Maximum Composite Width and Opening Collar); Cboe C2 Exchange
Inc. (``C2'') Rule 6.11(a) (definitions of Maximum Composite Width
and Opening Collar); see also Miami Securities Exchange, Inc.
(``MIAX'') Rule 503(f)(2) (which permits MIAX to determine by
circular an acceptable range in which openings are permissible if
there is no valid width national best bid or offer (``NBBO'')).
---------------------------------------------------------------------------
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.\16\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \17\ 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) \18\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
\18\ 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,\19\ 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.
---------------------------------------------------------------------------
\19\ The Exchange notes pursuant to Rule 5.31(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.\20\ 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.
---------------------------------------------------------------------------
\20\ See Rule 5.31(h); see also definition of Maximum Composite
Width and Opening Collar in Rule 5.31(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.
Additionally, the Exchange believes the proposed rule change to
permit the
[[Page 7432]]
Exchange to determine the amounts of the Maximum Composite Width and
Opening Collar on a class and Composite Bid basis will remove
impediments to and perfect the mechanism of a free and open market and
a national market system and protect investors, because it will provide
the Exchange with flexibility to consider the different market models
and characteristics of different classes, and respond to then-current
market conditions. The Rules currently permit the Exchange to modify
these amounts during the opening auction process when it deems
necessary to maintain a fair and orderly opening process (which
modifications the Exchange disseminates to all subscribers to the
Exchange's data feeds that deliver opening auction updates). This
proposed change merely permits the Exchange to modify these amounts at
any time as it deems necessary and appropriate. The Exchange notes
several options exchanges are able to change the amounts of valid
opening widths by notice or circular and do not need to submit a rule
filing to the Commission to do so, and the proposed rule change would
provide the Exchange with the same flexibility to determine maximum
opening widths that other exchanges have.\21\
---------------------------------------------------------------------------
\21\ See, e.g., NOM Options 3, Section 8(a)(6), EDGX Rule
21.7(a) (definitions of Maximum Composite Width and Opening Collar),
BZX Rule 21.7(a) (definitions of Maximum Composite Width and Opening
Collar), and C2 Rule 6.11(a) (definitions of Maximum Composite Width
and Opening Collar); see also MIAX Rule 503(f)(2) (which permits
MIAX to determine by circular an acceptable range in which openings
are permissible if there is no valid width NBBO).
---------------------------------------------------------------------------
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 believes the
proposed rule change to determine the amounts of the Maximum Composite
Width and Opening Collar on a class and Composite Bid basis will not
impose any burden on intramarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act, because the
determined amounts (by Composite Bid) for each class will apply to all
orders of all market participants in the applicable class in the same
manner. The Exchange believes it is appropriate to be able to determine
different amounts on a class basis (it already determines different
amounts on a Composite Bid basis), because it will provide the Exchange
with flexibility to consider the different market models and
characteristics of different classes, and respond to then-current
market conditions. The Rules currently permit the Exchange to modify
these amounts during the opening auction process when it deems
necessary to maintain a fair and orderly opening process (which
modifications the Exchange disseminates to all subscribers to the
Exchange's data feeds that deliver opening auction updates). This
proposed change merely permits the Exchange to modify these amounts at
any time as it deems necessary and appropriate.
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. The Exchange does not believe the
proposed rule change to permit the Exchange to determine the amounts of
the Maximum Composite Width and Opening Collar on a class and Composite
Bid basis will impose any burden on intermarket competition that is not
necessary or appropriate in furtherance of the purposes of the Act.
Several options exchanges are able to change the amounts of valid
opening widths by notice or circular and do not need to submit a rule
filing to the Commission to do so, and the proposed rule change would
provide the Exchange with the same flexibility to determine maximum
opening widths that other exchanges have.\22\
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\22\ See, e.g., NOM Options 3, Section 8(a)(6), EDGX Rule
21.7(a) (definitions of Maximum Composite Width and Opening Collar),
BZX Rule 21.7(a) (definitions of Maximum Composite Width and Opening
Collar), and C2 Rule 6.11(a) (definitions of Maximum Composite Width
and Opening Collar); see also MIAX Rule 503(f)(2) (which permits
MIAX to determine by circular an acceptable range in which openings
are permissible if there is no valid width NBBO).
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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
The Exchange has designated this rule filing as non-controversial
under Section 19(b)(3)(A) \23\ of the Act and Rule 19b-4(f)(6) \24\
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.\25\
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\23\ 15 U.S.C. 78s(b)(3)(A).
\24\ 17 CFR 240.19b-4(f)(6).
\25\ 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.
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A proposed rule change filed under Rule 19b-4(f)(6) \26\ normally
does not become operative for 30 days after the date of filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\27\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative
[[Page 7433]]
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\
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\26\ Id.
\27\ 17 CFR 240.19b-4(f)(6)(iii).
\28\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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-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.
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\
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\29\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-01834 Filed 1-27-21; 8:45 am]
BILLING CODE 8011-01-P
