Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Order Start Times During Its Early Trading Session, 12047-12052 [2021-04090]
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Federal Register / Vol. 86, No. 38 / Monday, March 1, 2021 / Notices
C. Manner of Collecting, Processing,
Sequencing, Making Available and
Disseminating Last Sale Information
Not applicable.
become operational upon approval by
the Commission.
D. Development and Implementation
Phases
The amendment proposed herein
would be implemented to coincide with
amendments filed by the equity
exchanges and approved by the
Commission.
E. Analysis of Impact on Competition
The amendment proposed herein does
not impose any burden on competition
that is not necessary or appropriate in
furtherance of the purposes of the Act
because the amendment simply
incorporates into the UTP Plan the
processes for Regulatory Halts that will
be proposed by the equity exchanges.
The Participants do not believe that the
proposed amendment introduces terms
that are unreasonably discriminatory for
the purposes of Section 11A(c)(1)(D) of
the Act.
F. Written Understanding or Agreements
Relating to Interpretation of, or
Participation in, Plan
Not applicable.
G. Approval by Sponsors in Accordance
With Plan
Section IV(C)(1)(a) of the UTP Plan
requires the Participants to
unanimously approve the amendment
proposed herein. They so approved it.
H. Description of Operation of Facility
Contemplated by the Proposed
Amendment
Not applicable.
I. Terms and Conditions of Access
Not applicable.
J. Method of Determination and
Imposition, and Amount of, Fees and
Charges
Not applicable.
K. Method and Frequency of Processor
Evaluation
Not applicable.
L. Dispute Resolution
Not applicable.
II. Regulation NMS Rule 601(a) (Solely
in Its Application to the Amendment to
the UTP Plan)
A. Equity Securities for Which
Transaction Reports Shall Be Required
by the Plan
Not applicable.
B. Reporting Requirements
Not applicable.
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D. Manner of Consolidation
Not applicable.
E. Standards and Methods Ensuring
Promptness, Accuracy and
Completeness of Transaction Reports
Not applicable.
F. Rules and Procedures Addressed to
Fraudulent or Manipulative
Dissemination
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G. Terms of Access to Transaction
Reports
Not applicable.
H. Identification of Marketplace of
Execution
Not applicable.
III. Solicitation of Comments
The Commission seeks comments on
the Amendment. Interested persons are
invited to submit written data, views,
and arguments concerning the
foregoing, including whether the
proposed Amendment is consistent with
the Act and the rules and regulations
thereunder applicable to national
market system plans. 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 S7–
24–89 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 S7–24–89. 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
website (https://www.sec.gov/rules/
sro.shtml). Copies of the submission, all
written statements with respect to the
proposed Amendment that are filed
with the Commission, and all written
communications relating to the
proposed Amendment between the
Commission and any person, other than
those that may be withheld from the
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public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for website
viewing and printing at the principal
office of the Plan. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number S7–24–89
and should be submitted on or before
March 22, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–04089 Filed 2–26–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91191; File No. SR–
CboeEDGX–2021–010]
Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend
Order Start Times During Its Early
Trading Session
February 23, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on February
11, 2021, Cboe EDGX Exchange, Inc.
(the ‘‘Exchange’’ or ‘‘EDGX’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX’’) proposes to
amend order start times during its Early
Trading Session. The text of the
17 17
CFR 200.30–3(a)(85).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 86, No. 38 / Monday, March 1, 2021 / Notices
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 11.1 to allow Users to designate
their orders to become eligible for
execution at 7:00 a.m. Eastern Time
(‘‘ET’’) during the new Early Trading
Session extended hours.
The Exchange currently offers four
distinct trading sessions where the
Exchange accepts orders for potential
execution: (1) The ‘‘Early Trading
Session,’’ which begins at 4:00 a.m. ET
and continues until 8:00 a.m. ET,3 (2)
the ‘‘Pre-Opening Session,’’ which
begins at 8:00 a.m. ET and continues
until 9:30 a.m. ET,4 (3) ‘‘Regular Trading
Hours,’’ which begin at 9:30 a.m. ET and
continue until 4:00 p.m. ET,5 and (4) the
‘‘Post-Closing Trading Session,’’ which
begins at 4:00 p.m. ET and continues
until 8:00 p.m. ET.6
The Exchange recently submitted an
immediately effective rule filing which
amended the Early Trading Session to
extend its hours from a 7:00 a.m. ET
start to a 4:00 a.m. ET start, and to allow
Users to begin entering orders into the
3 ‘‘Early Trading Session’’ means the time
between 4:00 a.m. and 8:00 a.m. ET. See Rule
1.5(ii).
4 ‘‘Pre-Opening Session’’ means the time between
8:00 a.m. and 9:30 a.m. ET. See Rule 1.5(s).
5 ‘‘Regular Trading Hours’’ means the time
between 9:30 a.m. and 4:00 p.m. ET. See Rule
1.5(y).
6 ‘‘Post-Closing Trading Session’’ means the time
between 4:00 p.m. and 8:00 p.m. ET. See Rule
1.5(r).
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System prior to the Early Trading
Session at 3:30 a.m. ET.7 The Exchange
intends to launch the new Early Trading
Session extended hours on March 8,
2021.8 As amended, Rule 11.1 now
provides that the Exchange will not
accept the following orders prior to 4:00
a.m. ET: Orders with a Post Only
instruction, ISOs, Market Orders other
than those with a TIF instruction of
Regular Hours Only or a Stop Price,
orders with a Minimum Execution
Quantity instruction that also include a
TIF instruction of Regular Hours Only,
and all orders with a TIF instruction of
IOC or FOK. Further, at the
commencement of the Early Trading
Session, orders entered between 3:30
a.m. and 4:00 a.m. ET will be handled
in time sequence, beginning with the
order with the oldest time stamp, and
will be placed on the EDGX Book,
routed, cancelled, or executed in
accordance with the terms of the order.
In light of the planned extension of
the Early Trading Session, the Exchange
seeks to continue to provide Users with
the option to submit orders that become
eligible for execution during the Early
Trading Session beginning at 7:00 a.m.
ET. In particular, the proposed rule
change amends Rule 11.1 to provide
that at the commencement of the Early
Trading Session, orders entered between
3:30 a.m. and 4:00 a.m. ET, will become
eligible for execution (‘‘4:00 a.m. Start’’),
unless designated as eligible for
execution during the Early Trading
Session beginning at 7:00 a.m. ET (‘‘7:00
a.m. Start’’). Orders with a 7:00 a.m.
Start designation may be entered
between 3:30 a.m. and 7:00 a.m. ET. At
each Start time that orders may become
eligible for execution in the Early
Trading Session (4:00 a.m. or 7:00 a.m.
ET), orders will be handled in time
sequence, beginning with the order with
the oldest time stamp, and will be
placed on the EDGX Book, routed,
cancelled, or executed in accordance
with the terms of the order.9 The
Exchange will not accept the following
orders prior to 4:00 a.m. Eastern Time
or prior to 7:00 a.m. Eastern Time for
orders eligible for a 7:00 a.m. Start:
Orders with a Post Only instruction,
ISOs, Market Orders other than those
with a TIF instruction of Regular Hours
Only or a Stop Price, orders with a
7 See Securities Exchange Act Release No. 90509
(November 24, 2020), 85 FR 77310 (December 1,
2020) (SR–CboeEDGX–2020–056).
8 The Exchange will announce the
implementation of the extended Early Trading
Session to Members in advance via Trade Desk
Notice.
9 A User will be able to designate orders with a
7:00 a.m. Start through the use of a port setting. See
also infra note 14.
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Minimum Execution Quantity
instruction that also include a TIF
instruction of Regular Hours Only, and
all orders with a TIF instruction of IOC
or FOK.
The proposed rule change allows
Users to continue to be able to choose
to submit orders that become eligible for
execution during the Early Trading
Session beginning at 7:00 a.m. ET, as
they may today in connection with the
current Early Trading Session hours.10
As the Exchange’s Early Trading Session
currently begins at 7:00 a.m. ET and
other equities exchanges, including the
Exchange’s affiliated equities
exchanges,11 have early trading sessions
that begin at 7:00 a.m. ET,12 the
Exchange understands that many market
participants have configured their
systems for trading beginning at 7:00
a.m. ET and find 7:00 a.m. ET to be a
time at which there are additional
opportunities across the industry to
access and source liquidity. For
example, the Exchange understands that
retail brokerage firms generally have
standard agreements in place with their
retail customers which provide that
retail customer orders may not become
eligible for execution until a specific
time, and is aware of at least one such
firm on the Exchange that has standard
agreements in place with their retail
customers that limit this time to 7:00
a.m. ET. The Exchange also understands
that multiple liquidity providers wish to
continue to participate in the Early
Trading Session beginning at 7:00 a.m.
given the particular liquidity and
activity present across the U.S. equity
markets at this specific time.13 Without
a 7:00 a.m. Start designation available,
certain retail investors may be limited in
their ability to source liquidity that is
available at this time during the
Exchange’s Early Trading Session, and
liquidity providers may similarly
choose not to participate in this trading
session, thereby reducing liquidity
available to other market participants
and investors.14
10 The Exchange notes that the extended hours are
intended to provide market participants with
additional opportunities to source and access
liquidity for their orders on the Exchange. See
supra note 7.
11 The Exchange’s affiliated equities exchange are
Cboe BZX Exchange, Inc. (‘‘BZX’’), Cboe BYX
Exchange, Inc. (‘‘BYX’’), and Cboe EDGA Exchange,
Inc. (‘‘EDGA’’).
12 See e.g., BZX Rule 1.5(ee), BYX Rule 1.5(ee),
EDGA Rule 1.5(ii), NYSE Rule 7.34(a)(1), NYSE
American Rule 7.34E, and Nasdaq BX Rule
4120(b)(4), each of which provide that their
respective early trading sessions open at 7:00 a.m.
ET.
13 See id.
14 The Exchange is aware are at least one liquidity
provider that has expressed that it will not
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As such, the proposed rule change is
intended to alleviate potential difficulty
for Users that generally begin
participating in the markets beginning at
7:00 a.m. ET, and to facilitate a fair and
orderly market on the Exchange where
retail investors and other market
participants can benefit from trading
opportunities present in the Exchange’s
Early Trading Session. As such, the
proposed 7:00 a.m. Start designation
will provide Users with greater control
over their orders and more flexibility to
carry out their investment strategies and
manage their needs based on market
conditions. In turn, Users may continue
to provide meaningful liquidity and
benefit from trading opportunities
present on the Exchange throughout the
duration of the Early Trading Session.
The Exchange notes that, as proposed,
orders eligible for execution beginning
at 7:00 a.m. ET will function in the same
manner as they currently do today upon
the 7:00 a.m. ET commencement of the
Early Trading Session (and as they will
upon the 4:00 a.m. ET commencement
for the extended Early Trading Session
hours). That is, Users will submit orders
eligible for a 7:00 a.m. ET Start during
the Early Trading Session in the same
manner as they may currently submit
orders eligible for execution during the
Early Trading Session, and will
continue to be able to submit all such
orders at the beginning of the early
order acceptance period. As orders with
a 7:00 a.m. Start designation will not be
activated until 7:00 a.m., Users will
have through 7:00 a.m. to submit such
orders. The Exchange will continue not
to accept the same order types listed in
Rule 11.1 prior to the commencement of
an order’s eligible start time in the Early
Trading Session. The proposed rule
change makes it clear that orders with
a Post Only instruction, ISOs, Market
Orders other than those with a TIF
instruction of Regular Hours Only or a
Stop Price, orders with a Minimum
Execution Quantity instruction that also
include a TIF instruction of Regular
Hours Only, and all orders with a TIF
instruction of IOC or FOK will continue
to be rejected prior to an order’s eligible
start time in the Early Trading Session,
as they are today. Additionally, the
System will continue to handle all
orders eligible for execution during the
Early Trading Session, including those
with a 7:00 a.m. Start designation,
pursuant to Rule 11.1. In particular, the
proposed rule language makes it clear
that all orders eligible for execution
during the Early Trading Session will
continue to be handled in time
participate in the Early Trading Session without a
7 a.m. Start feature.
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sequence, beginning with the order with
the oldest time stamp, and will be
placed on the EDGX Book, routed,
cancelled, or executed in accordance
with the terms of the order, beginning
at the Start time (either 4:00 a.m. or 7:00
a.m. ET) at which they become eligible
for execution in the Early Trading
Session.15 At 7:00 a.m., orders with a
7:00 a.m. Start designation will simply
be handled as any incoming order is
handled during the Early Trading
Session, and merge, in time sequence,
onto the already active EDGX Order
Book for the Early Trading Session. A
User must continue to select the
appropriate TIF to allow the order to
execute in the Early Trading and a port
setting will merely permit a User to
designate an order that is already
marked for the Early Trading Session to
become active later in the Early Trading
Session. The Exchange notes that the
proposal does not extend or otherwise
modify any trading hours during which
trading is currently permissible on the
Exchange but simply permits a User to
activate an order at a specific time
during an ongoing trading session.
Additionally, the Exchange notes that
permitting Users to designate a 7:00 a.m.
ET Start for which orders may become
active during an early trading session
that begins at 4:00 a.m. is consistent
with the rules currently in place on
Nasdaq Stock Market LLC (‘‘Nasdaq’’).
Nasdaq’s early trading session currently
begins at 4:00 a.m. and continues until
the 9:30 a.m. commencement of
Nasdaq’s regular trading hours.16
Nasdaq Rule 4703(a) allows participants
to designate a time at which certain
orders 17 may become active and
includes 7:00 a.m. ET as an available
time at which participants may activate
such orders entered prior to 7:00 a.m.
ET.18
15 The System may delay the release of 7:00 a.m.
Start orders if the System is experiencing an
unusually significant amount of orders with a 7:00
a.m. Start designation that would potentially impact
other System performance and processing functions
during the Early Trading Session. The Exchange
does not anticipate an occasion in which the
System would have to implement a delayed release
for orders with a 7:00 a.m. Start during the Early
Trading Session. As the System does not have
unlimited capacity, the proposed System flexibility
to delay the release of orders with a 7:00 a.m. Start
designation is a reasonable preventative measure to
ensure that the System has the capacity to maintain
fair and orderly markets in the event that there is
an unusually significant amount of orders queued
for 7:00 a.m. ET activation.
16 See Nasdaq Rule 4701(g).
17 Orders using the SCAN or RTFY routing
strategy available on Nasdaq.
18 The Exchange notes that the designation for
orders to become active at 7:00 a.m. ET on Nasdaq
is similarly a port level setting. See Securities
Exchange Act Release No. 83125 (April 27, 2018),
83 FR 19586 (May 3, 2018) (SR–NASDAQ–2017–
088).
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12049
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.19 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 20 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) 21 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the proposed rule
change to allow Users to submit orders
that become eligible for execution
beginning at 7:00 a.m. ET, once the
Exchange extends its Early Trading
Session hours to begin at 4:00 a.m. ET,
will remove impediments to and perfect
the mechanism of a free and open
market and national market system and
will benefit investors by continuing to
provide Users with the option to
activate their orders for execution
beginning at 7:00 a.m. ET and thus the
opportunity to continue to source and
access liquidity at a specific time in
which there are additional trading
opportunities in the markets. The
Exchange does not believe that the
proposed rule change will present any
unique or novel issues nor affect the
maintenance of a fair and orderly
market, as many market participants
have configured their systems for
trading beginning at 7:00 a.m. ET in line
with the commencement of the early
trading sessions on other equities
exchanges, including the Exchange’s
affiliated equities exchanges.22 Rather,
the proposed rule change is designed to
benefit investors, as well as overall
liquidity in the Early Trading Session,
by providing Users with the option to
continue to activate their orders for
execution during the Early Trading
19 15
20 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
21 Id.
22 See
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supra note 12.
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Session beginning at 7:00 a.m. ET when
the Exchange extends its Early Trading
Session hours. As described above,
certain market participants, such as
retail investors and liquidity providers,
may be limited in their ability to source
liquidity that is available in the
Exchange’s Early Trading Session or
choose not to participate in the Early
Trading Session without the availability
of a 7:00 a.m. Start designation, thereby
reducing liquidity available to other
market participants and investors. Thus,
the proposed rule change will alleviate
potential difficulties for Users that
generally begin participating in in the
markets at 7:00 a.m. ET (as these Users
would not have to time the entry of their
orders to occur as close to 7:00 a.m. ET
as possible), and will facilitate a fair and
orderly market on the Exchange by
allowing retail investors and other
market participants to benefit from
trading opportunities present at this
specific time during the Exchange’s
Early Trading Session. Overall, the
proposed rule change will serve to
protect investors and the public interest
by providing Users with greater control
over their orders and more flexibility to
carry out their investment strategies and
manage their needs based on market
conditions, thereby allowing them to
continue to provide meaningful
liquidity and benefit from trading
opportunities present on the Exchange
throughout the duration of the Early
Trading Session.
The proposed rule change will not
affect the protection of investors as it
would simply provide Users with the
opportunity to choose whether orders
entered for potential execution in the
Early Trading Session will become
active at the new 4:00 a.m. ET
commencement of that trading session,
or will instead continue to become
active at 7:00 a.m. ET, as they do today.
The System will continue to accept all
orders eligible for execution during the
Early Trading Session beginning at the
early acceptance time, will continue to
reject the same list of order types prior
to the time an order is eligible to start
trading in the Early Trading Session,
and will continue to process all orders
that are queued for participation in the
Early Trading Session in time priority
pursuant to Rule 11.1.23 That is, orders
with a 7:00 a.m. Start designation will
be handled as any incoming order is
handled during the Early Trading
Session, and merge, in time sequence,
onto the already active EDGX Order
Book for the Early Trading Session. As
described above, a User must continue
to select the appropriate TIF to allow
23 See
also supra note 15.
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the order to execute in the Early Trading
Session and a port setting step will just
permit an order already marked for
execution in the Early Trading Session
to become active later in the Early
Trading Session. The proposed rule
change does not extend or otherwise
modify any trading hours during which
trading is currently permissible on the
Exchange but simply permits Users to
choose to activate their orders at a
specific time during an ongoing trading
session.
The Exchange also notes that, as with
any order eligible for trading in the
Early Trading Session, market
participants must monitor market
conditions to ensure compliance with
best execution obligations 24 for their
orders with a 7:00 a.m. Start designation
and will be able to cancel or modify
their orders with a 7:00 a.m. Start time
designation at any time prior to their
activation, thus allowing them to react
to market conditions that may cause
them to violate their best execution
obligations. FINRA Rule 5310(a)(1)
provides that a member must use
reasonable diligence to ascertain the
best market for a security and buy or sell
in such market so that the resultant
price to the customer is as favorable as
possible under prevailing market
conditions. FINRA Rule 5310(a)(1)(A)
states that one of the factors that will be
considered in determining whether a
member has used ‘‘reasonable
diligence’’ is ‘‘the character of the
market for the security (e.g., price,
volatility, relative liquidity, and
pressure on available
communication).’’ 25 The Exchange
believes that Users are accustomed to
this additional analysis and will
continue to apply such in determining
whether to designate an activation at
7:00 a.m. ET. The regulatory guidance
with respect to best execution
anticipates the continued evolution of
execution venues:
[B]est execution is a facts and
circumstances determination. A brokerdealer must consider several factors affecting
the quality of execution, including, for
example, the opportunity for price
24 A member’s best execution obligation may also
include cancelling an order when market
conditions deteriorate and could result in an
inferior execution or informing customers where
the execution of their order may be delayed
intentionally as the member utilizes reasonable
diligence to ascertain the best market for the
security. See FINRA Rule 5130. See also FINRA
Regulatory Notice 15–46, Best Execution. Guidance
on Best Execution Obligations in Equity, Options,
and Fixed Income Markets, (November 2015).
25 These characteristics are reflected in the
disclosure requirements mandated by Exchange
Rule 3.21 before a Member may accept an order
from a customer for execution in the Pre-Opening,
Post-Closing, and proposed Early Trading Sessions.
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Fmt 4703
Sfmt 4703
improvement, the likelihood of execution
. . ., the speed of execution and the trading
characteristics of the security, together with
other non-price factors such as reliability and
service.26
To the extent there may be best
execution obligations at issue, they are
no different than the best execution
obligations faced by brokers in the
current market structure, including the
current use of orders that become
eligible for execution at the start of the
Early Trading Session, Pre-Opening
Session or Regular Trading Hours,
depending on the TIF selected by the
User. A User may use continue to use
TIF instructions to forgo a possible
execution at the start of one trading
session, or at a 7 a.m. Start time, as
proposed, if they believe doing so is
consistent with their best execution
obligations as they anticipate that the
market for the security may improve
upon the start of another trading
session, or at 7:00 a.m. ET, as proposed.
Applicable best execution guidance
contains no formulaic mandate as to
whether or how brokers should direct
orders. The optionality created by the
proposed rule change simply represents
one tool available to User to meet their
best execution obligations.
The Exchange also notes that Users
are required to implement regulatory
risk management controls and
procedures that are reasonably designed
to prevent the entry of orders that fail
to comply with regulatory requirements
that apply on a pre-order entry basis
pursuant to the Market Access Rule
under 15c3–5of the Act.27 These pretrade controls must, for example, be
reasonably designed to assure
compliance with Exchange trading rules
and Commission rules under Regulation
SHO 28 and Regulation NMS.29 In
accordance with the Market Access
Rule, a User’s procedures must be
reasonably designed to ensure
compliance with their applicable
regulatory requirements, not just at the
time the order is routed to the Exchange,
but also at the time the order becomes
eligible for execution.
In addition to this, the proposed rule
change will not affect the protection of
investors as it is generally consistent
26 See Securities Exchange Act Release No. 43950
(November 17, 2000), 65 FR 75414 (December 1,
2000) (‘‘Disclosure of Order Execution and Routing
Practices release’’).
27 See Securities Exchange Act Release No. 63241
(November 3, 2010), 75 FR 69792 (November 15,
2010) (File no. S7–03–10).
28 See e.g., Question 2.6 of the Division of Trading
and Markets: Response to Frequently Asked
Questions Concerning Regulations SHO, available
at https://www.sec.gov/divisions/marketreg/
mrfaqregsho1204.htm.
29 17 CFR 240.610–611.
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Federal Register / Vol. 86, No. 38 / Monday, March 1, 2021 / Notices
with Nasdaq Rule 4703(a), as previously
approved by the Commission,30 which
allows participants to designate 7:00
a.m. ET as a time in which certain
orders entered prior to 7:00 a.m. ET may
become active during Nasdaq’s early
trading session, which likewise
commences at 4:00 a.m. ET. Unlike
Nasdaq Rule 4703(a), which limits the
types of orders that may be designated
to begin at 7:00 a.m. ET, the proposal
will provide Users with the control and
flexibility to designate a 7 a.m. Start
time for any of their same orders
currently eligible to execute in the Early
Trading Session, thereby providing the
opportunity for all orders eligible for the
Early Trading Session to access the
additional liquidity and execution
opportunities present in the markets at
this particular time, as they may today.
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. Particularly,
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 will be able to
designate their orders to become eligible
for execution during the Early Trading
Session beginning at 7:00 a.m. ET. All
Users’ orders submitted with a 7:00 a.m.
Start designation will become eligible
for execution at 7:00 a.m. ET in the
same time sequence as they are today
and will be subject to the same order
type restrictions as are currently in
place. The Exchange also 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, and may promote
competition, because the proposed
activation time is substantially similar
to that which is currently in place on
Nasdaq, as previously approved by the
Commission, and other equities
exchanges currently begin their early
trading sessions at 7:00 a.m. ET.
Therefore, the proposal will also allow
the Exchange to compete with those
exchanges that allow for a 7:00 a.m. ET
start time.
30 See
supra note 16.
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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 filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 31 and Rule
19b–4(f)(6) thereunder.32 Because the
proposed rule change does not: (i)
Significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
for 30 days from the date on which it
was filed, or such shorter time as the
Commission may designate, if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 33 and Rule 19b–4(f)(6)
thereunder.34
A proposed rule change filed under
Rule 19b–4(f)(6) 35 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),36 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 proposed
rule change may become operative
immediately. This will allow the
Exchange to implement the proposal at
the same time as the Exchange’s new
extended Early Trading Session hours,
which the Exchange plans to launch on
March 8, 2021. In seeking this waiver,
the Exchange asserts that this proposal
neither introduces any new or novel
issues nor extends or otherwise
modifies trading hours during which
trading is currently permissible on the
Exchange. Rather, the Exchange states
that this proposal will allow market
participants and investors to continue to
submit orders that become eligible for
31 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
33 15 U.S.C. 78s(b)(3)(A).
34 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires the Exchange to give the
Commission written notice of the Exchange’s intent
to file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
35 17 CFR 240.19b–4(f)(6).
36 17 CFR 240.19b–4(f)(6)(iii).
32 17
PO 00000
Frm 00133
Fmt 4703
Sfmt 4703
12051
execution at 7:00 a.m. ET, as they
already do today, once the Exchange
extends its Early Trading Session hours
to begin at 4:00 a.m. ET. Based on the
foregoing, the Commission believes that
allowing this proposed rule change to
become operative upon filing is
consistent with the protection of
investors and the public interest. The
Commission hereby waives the 30-day
operative delay and designates the
proposal operative upon filing.37
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–2021–010 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–2021–010. 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
37 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
E:\FR\FM\01MRN1.SGM
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12052
Federal Register / Vol. 86, No. 38 / Monday, March 1, 2021 / Notices
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
offices 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–2021–010, and
should be submitted on or before March
22, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.38
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–04090 Filed 2–26–21; 8:45 am]
BILLING CODE 8011–01–P
Exchange Act,4 subject to certain
limitations, authorizes the Commission
to conditionally or unconditionally
exempt any person, security, or
transaction, or any class thereof, from
any provision of the Exchange Act or
rule thereunder, if necessary or
appropriate in the public interest and
consistent with the protection of
investors.
The Exchange filed a proposed rule
change 5 under Section 19(b) of the
Exchange Act to update various C2
Rules and Chapters to reflect changes to
the Cboe Options rulebook. Namely, in
the proposed rule change, the Exchange
proposed to incorporate by reference
rule changes made to each Cboe Options
rule cross-referenced in the following
C2 chapters or sections: Chapter 3,
Section B (TPH Registration); 6 Chapter
4, Section A (Equity and ETP Options); 7
Chapter 4, Section B (Index Options); 8
Chapter 5 (Business Conduct); 9 Chapter
6, Section E (Intermarket Linkage); 10
Chapter 6, Section F (Exercises and
Deliveries); 11 Chapter 7, Section A; 12
Chapter 7, Section B; 13 Chapter 9
(Doing Business with the Public); 14
Chapter 10 (Margin Requirements); 15
Chapter 1 (Net Capital Requirements); 16
Chapter 12 (Summary Suspension); 17
Chapter 13 (Discipline); 18 Chapter 14
4 15
U.S.C. 78mm(a)(1).
Securities Exchange Act Release No. 87646
(December 2, 2019), 84 FR 66938 (December 6,
2019) (SR–C2–2019–025).
6 Incorporates by reference Cboe Options Chapter
3, Section B.
7 Incorporates by reference Cboe Options Chapter
4, Section A.
8 Incorporates by reference Cboe Options Chapter
4, Section B.
9 Incorporates by reference Cboe Options Chapter
8.
10 Incorporates by reference Cboe Options
Chapter 5, Section E.
11 Incorporates by reference Cboe Options
Chapter 6, Section B.
12 Incorporates by reference Cboe Options
Chapter 7, Section A.
13 Incorporates by reference Cboe Options
Chapter 7, Section B.
14 Incorporates by reference Cboe Options
Chapter 9. See also Securities Exchange Act Release
No. 87646 (December 2, 2019), 84 FR 66938
(December 6, 2019) (SR–C2–2019–025), which
relocated former Rule 3.19 to Rule 9.20 in order to
include Cboe Options Rule 9.20 in C2 Chapter 9’s
incorporation of Cboe Options Chapter 9 by
reference, as former Rule 3.19 is identical to Cboe
Options Rule 9.20 and it is within the same
category of exchange rules otherwise incorporated
into C2 Chapter 9 by reference to Cboe Options
Chapter 9 (i.e., rule related to doing business with
the public).
15 Incorporates by reference Cboe Options
Chapter 10.
16 Incorporates by reference Cboe Options
Chapter 11.
17 Incorporates by reference Cboe Options
Chapter 12.
18 Incorporates by reference Cboe Options
Chapter 13.
5 See
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91193]
Order Granting Application by Cboe C2
Exchange, Inc. for Exemption Pursuant
to Section 36(a) of the Exchange Act
From the Rule Filing Requirements of
Section 19(b) of the Exchange Act With
Respect to Certain Rules Incorporated
by Reference
February 23, 2021.
Cboe C2 Exchange, Inc. (‘‘C2’’ or the
‘‘Exchange’’) has filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) an application for
an exemption under Section 36(a)(1) of
the Securities Exchange Act of 1934
(‘‘Exchange Act’’) 1 from the rule filing
requirements of Section 19(b) of the
Exchange Act 2 with respect to certain
rules of Cboe Exchange, Inc. (‘‘Cboe’’)
that the Exchange seeks to incorporate
by reference.3 Section 36(a)(1) of the
38 17
CFR 200.30–3(a)(12).
U.S.C. 78mm(a)(1).
2 15 U.S.C. 78s(b).
3 See letter from Rebecca Tenuta, Counsel, Cboe
C2 Exchange, Inc. to Vanessa Countryman,
Secretary, Commission, dated February 9, 2021
(‘‘Exemptive Request’’).
1 15
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18:48 Feb 26, 2021
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Frm 00134
Fmt 4703
Sfmt 4703
(Arbitration); 19 and Chapter 15
(Hearings and Review) 20 (the ‘‘Cboe
Incorporated Rules’’).
The Commission notes it previously
granted C2 an exemption from the rule
filing requirements of Section 19(b) of
the Act for the rules of the Cboe set forth
in the C2 rules referenced above.21
Since that time, the Cboe has
renumbered and relocated the
previously incorporated rules within its
rulebook. As a result, C2 has submitted
this exemptive request to reflect rule
number changes in the Cboe Options
rulebook. Specifically, the Exchange is
now requesting, pursuant to Rule 0–12
under the Exchange Act,22 that the
Commission grant an exemption from
the rule filing requirements of Section
19(b) of the Exchange Act for changes to
the Chapters 3–7 and 9–15 of the
Exchange’s rules that are effected solely
by virtue of a change to a Cboe
Incorporated Rule. The Exchange
requests that it be permitted to
incorporate by reference changes made
to the Cboe Incorporated Rules without
the need for the Exchange to file
separately the same proposed rule
change pursuant to Section 19(b) of the
Exchange Act.23
The Exchange represents that the
Cboe Incorporated Rules are not trading
rules.24 Moreover, the Exchange states
that it proposes to incorporate by
reference a category of rules (rather than
individual rules within a category).25
The Exchange also represents that, as a
condition of this exemption, the
Exchange will provide written notice to
its applicants and members whenever
Cboe proposes a change to a Cboe
Incorporated Rule.26
According to the Exchange, this
exemption is necessary and appropriate
to maintain consistency between C2
rules and the Cboe Incorporated Rules,
thus helping to ensure identical
regulation of C2 Permit Holders that are
also Cboe Trading Permit Holders with
respect to the incorporated provisions as
19 Incorporates by reference Cboe Options
Chapter 14.
20 Incorporates by reference Cboe Options
Chapter 15.
21 See Securities Exchange Act Release Nos.
61152 (December 10, 2009), 74 FR 66699 (December
16, 2009); and 80339 (March 29, 2017), 82 FR 16442
(April 4, 2017).
22 17 CFR 240.0–12.
23 See Exemptive Request, supra note 3.
24 Id.
25 Id.
26 The Exchange states that it will provide such
notice via a posting on the same website location
where the Exchange posts its own rule filings
pursuant to Rule 19b–4(l) within the timeframe
required by such Rule. In addition, the Exchange
states that the website posting will include a link
to the location on Cboe’s website where the
applicable proposed rule change is posted. Id.
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]]>Agencies
[Federal Register Volume 86, Number 38 (Monday, March 1, 2021)]
[Notices]
[Pages 12047-12052]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-04090]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91191; File No. SR-CboeEDGX-2021-010]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Order Start Times During Its Early Trading Session
February 23, 2021.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on February 11, 2021, Cboe EDGX Exchange, Inc. (the ``Exchange'' or
``EDGX'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') proposes to
amend order start times during its Early Trading Session. The text of
the
[[Page 12048]]
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 11.1 to allow Users to
designate their orders to become eligible for execution at 7:00 a.m.
Eastern Time (``ET'') during the new Early Trading Session extended
hours.
The Exchange currently offers four distinct trading sessions where
the Exchange accepts orders for potential execution: (1) The ``Early
Trading Session,'' which begins at 4:00 a.m. ET and continues until
8:00 a.m. ET,\3\ (2) the ``Pre-Opening Session,'' which begins at 8:00
a.m. ET and continues until 9:30 a.m. ET,\4\ (3) ``Regular Trading
Hours,'' which begin at 9:30 a.m. ET and continue until 4:00 p.m.
ET,\5\ and (4) the ``Post-Closing Trading Session,'' which begins at
4:00 p.m. ET and continues until 8:00 p.m. ET.\6\
---------------------------------------------------------------------------
\3\ ``Early Trading Session'' means the time between 4:00 a.m.
and 8:00 a.m. ET. See Rule 1.5(ii).
\4\ ``Pre-Opening Session'' means the time between 8:00 a.m. and
9:30 a.m. ET. See Rule 1.5(s).
\5\ ``Regular Trading Hours'' means the time between 9:30 a.m.
and 4:00 p.m. ET. See Rule 1.5(y).
\6\ ``Post-Closing Trading Session'' means the time between 4:00
p.m. and 8:00 p.m. ET. See Rule 1.5(r).
---------------------------------------------------------------------------
The Exchange recently submitted an immediately effective rule
filing which amended the Early Trading Session to extend its hours from
a 7:00 a.m. ET start to a 4:00 a.m. ET start, and to allow Users to
begin entering orders into the System prior to the Early Trading
Session at 3:30 a.m. ET.\7\ The Exchange intends to launch the new
Early Trading Session extended hours on March 8, 2021.\8\ As amended,
Rule 11.1 now provides that the Exchange will not accept the following
orders prior to 4:00 a.m. ET: Orders with a Post Only instruction,
ISOs, Market Orders other than those with a TIF instruction of Regular
Hours Only or a Stop Price, orders with a Minimum Execution Quantity
instruction that also include a TIF instruction of Regular Hours Only,
and all orders with a TIF instruction of IOC or FOK. Further, at the
commencement of the Early Trading Session, orders entered between 3:30
a.m. and 4:00 a.m. ET will be handled in time sequence, beginning with
the order with the oldest time stamp, and will be placed on the EDGX
Book, routed, cancelled, or executed in accordance with the terms of
the order.
---------------------------------------------------------------------------
\7\ See Securities Exchange Act Release No. 90509 (November 24,
2020), 85 FR 77310 (December 1, 2020) (SR-CboeEDGX-2020-056).
\8\ The Exchange will announce the implementation of the
extended Early Trading Session to Members in advance via Trade Desk
Notice.
---------------------------------------------------------------------------
In light of the planned extension of the Early Trading Session, the
Exchange seeks to continue to provide Users with the option to submit
orders that become eligible for execution during the Early Trading
Session beginning at 7:00 a.m. ET. In particular, the proposed rule
change amends Rule 11.1 to provide that at the commencement of the
Early Trading Session, orders entered between 3:30 a.m. and 4:00 a.m.
ET, will become eligible for execution (``4:00 a.m. Start''), unless
designated as eligible for execution during the Early Trading Session
beginning at 7:00 a.m. ET (``7:00 a.m. Start''). Orders with a 7:00
a.m. Start designation may be entered between 3:30 a.m. and 7:00 a.m.
ET. At each Start time that orders may become eligible for execution in
the Early Trading Session (4:00 a.m. or 7:00 a.m. ET), orders will be
handled in time sequence, beginning with the order with the oldest time
stamp, and will be placed on the EDGX Book, routed, cancelled, or
executed in accordance with the terms of the order.\9\ The Exchange
will not accept the following orders prior to 4:00 a.m. Eastern Time or
prior to 7:00 a.m. Eastern Time for orders eligible for a 7:00 a.m.
Start: Orders with a Post Only instruction, ISOs, Market Orders other
than those with a TIF instruction of Regular Hours Only or a Stop
Price, orders with a Minimum Execution Quantity instruction that also
include a TIF instruction of Regular Hours Only, and all orders with a
TIF instruction of IOC or FOK.
---------------------------------------------------------------------------
\9\ A User will be able to designate orders with a 7:00 a.m.
Start through the use of a port setting. See also infra note 14.
---------------------------------------------------------------------------
The proposed rule change allows Users to continue to be able to
choose to submit orders that become eligible for execution during the
Early Trading Session beginning at 7:00 a.m. ET, as they may today in
connection with the current Early Trading Session hours.\10\ As the
Exchange's Early Trading Session currently begins at 7:00 a.m. ET and
other equities exchanges, including the Exchange's affiliated equities
exchanges,\11\ have early trading sessions that begin at 7:00 a.m.
ET,\12\ the Exchange understands that many market participants have
configured their systems for trading beginning at 7:00 a.m. ET and find
7:00 a.m. ET to be a time at which there are additional opportunities
across the industry to access and source liquidity. For example, the
Exchange understands that retail brokerage firms generally have
standard agreements in place with their retail customers which provide
that retail customer orders may not become eligible for execution until
a specific time, and is aware of at least one such firm on the Exchange
that has standard agreements in place with their retail customers that
limit this time to 7:00 a.m. ET. The Exchange also understands that
multiple liquidity providers wish to continue to participate in the
Early Trading Session beginning at 7:00 a.m. given the particular
liquidity and activity present across the U.S. equity markets at this
specific time.\13\ Without a 7:00 a.m. Start designation available,
certain retail investors may be limited in their ability to source
liquidity that is available at this time during the Exchange's Early
Trading Session, and liquidity providers may similarly choose not to
participate in this trading session, thereby reducing liquidity
available to other market participants and investors.\14\
---------------------------------------------------------------------------
\10\ The Exchange notes that the extended hours are intended to
provide market participants with additional opportunities to source
and access liquidity for their orders on the Exchange. See supra
note 7.
\11\ The Exchange's affiliated equities exchange are Cboe BZX
Exchange, Inc. (``BZX''), Cboe BYX Exchange, Inc. (``BYX''), and
Cboe EDGA Exchange, Inc. (``EDGA'').
\12\ See e.g., BZX Rule 1.5(ee), BYX Rule 1.5(ee), EDGA Rule
1.5(ii), NYSE Rule 7.34(a)(1), NYSE American Rule 7.34E, and Nasdaq
BX Rule 4120(b)(4), each of which provide that their respective
early trading sessions open at 7:00 a.m. ET.
\13\ See id.
\14\ The Exchange is aware are at least one liquidity provider
that has expressed that it will not participate in the Early Trading
Session without a 7 a.m. Start feature.
---------------------------------------------------------------------------
[[Page 12049]]
As such, the proposed rule change is intended to alleviate
potential difficulty for Users that generally begin participating in
the markets beginning at 7:00 a.m. ET, and to facilitate a fair and
orderly market on the Exchange where retail investors and other market
participants can benefit from trading opportunities present in the
Exchange's Early Trading Session. As such, the proposed 7:00 a.m. Start
designation will provide Users with greater control over their orders
and more flexibility to carry out their investment strategies and
manage their needs based on market conditions. In turn, Users may
continue to provide meaningful liquidity and benefit from trading
opportunities present on the Exchange throughout the duration of the
Early Trading Session.
The Exchange notes that, as proposed, orders eligible for execution
beginning at 7:00 a.m. ET will function in the same manner as they
currently do today upon the 7:00 a.m. ET commencement of the Early
Trading Session (and as they will upon the 4:00 a.m. ET commencement
for the extended Early Trading Session hours). That is, Users will
submit orders eligible for a 7:00 a.m. ET Start during the Early
Trading Session in the same manner as they may currently submit orders
eligible for execution during the Early Trading Session, and will
continue to be able to submit all such orders at the beginning of the
early order acceptance period. As orders with a 7:00 a.m. Start
designation will not be activated until 7:00 a.m., Users will have
through 7:00 a.m. to submit such orders. The Exchange will continue not
to accept the same order types listed in Rule 11.1 prior to the
commencement of an order's eligible start time in the Early Trading
Session. The proposed rule change makes it clear that orders with a
Post Only instruction, ISOs, Market Orders other than those with a TIF
instruction of Regular Hours Only or a Stop Price, orders with a
Minimum Execution Quantity instruction that also include a TIF
instruction of Regular Hours Only, and all orders with a TIF
instruction of IOC or FOK will continue to be rejected prior to an
order's eligible start time in the Early Trading Session, as they are
today. Additionally, the System will continue to handle all orders
eligible for execution during the Early Trading Session, including
those with a 7:00 a.m. Start designation, pursuant to Rule 11.1. In
particular, the proposed rule language makes it clear that all orders
eligible for execution during the Early Trading Session will continue
to be handled in time sequence, beginning with the order with the
oldest time stamp, and will be placed on the EDGX Book, routed,
cancelled, or executed in accordance with the terms of the order,
beginning at the Start time (either 4:00 a.m. or 7:00 a.m. ET) at which
they become eligible for execution in the Early Trading Session.\15\ At
7:00 a.m., orders with a 7:00 a.m. Start designation will simply be
handled as any incoming order is handled during the Early Trading
Session, and merge, in time sequence, onto the already active EDGX
Order Book for the Early Trading Session. A User must continue to
select the appropriate TIF to allow the order to execute in the Early
Trading and a port setting will merely permit a User to designate an
order that is already marked for the Early Trading Session to become
active later in the Early Trading Session. The Exchange notes that the
proposal does not extend or otherwise modify any trading hours during
which trading is currently permissible on the Exchange but simply
permits a User to activate an order at a specific time during an
ongoing trading session.
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\15\ The System may delay the release of 7:00 a.m. Start orders
if the System is experiencing an unusually significant amount of
orders with a 7:00 a.m. Start designation that would potentially
impact other System performance and processing functions during the
Early Trading Session. The Exchange does not anticipate an occasion
in which the System would have to implement a delayed release for
orders with a 7:00 a.m. Start during the Early Trading Session. As
the System does not have unlimited capacity, the proposed System
flexibility to delay the release of orders with a 7:00 a.m. Start
designation is a reasonable preventative measure to ensure that the
System has the capacity to maintain fair and orderly markets in the
event that there is an unusually significant amount of orders queued
for 7:00 a.m. ET activation.
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Additionally, the Exchange notes that permitting Users to designate
a 7:00 a.m. ET Start for which orders may become active during an early
trading session that begins at 4:00 a.m. is consistent with the rules
currently in place on Nasdaq Stock Market LLC (``Nasdaq''). Nasdaq's
early trading session currently begins at 4:00 a.m. and continues until
the 9:30 a.m. commencement of Nasdaq's regular trading hours.\16\
Nasdaq Rule 4703(a) allows participants to designate a time at which
certain orders \17\ may become active and includes 7:00 a.m. ET as an
available time at which participants may activate such orders entered
prior to 7:00 a.m. ET.\18\
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\16\ See Nasdaq Rule 4701(g).
\17\ Orders using the SCAN or RTFY routing strategy available on
Nasdaq.
\18\ The Exchange notes that the designation for orders to
become active at 7:00 a.m. ET on Nasdaq is similarly a port level
setting. See Securities Exchange Act Release No. 83125 (April 27,
2018), 83 FR 19586 (May 3, 2018) (SR-NASDAQ-2017-088).
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\19\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \20\ 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) \21\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\19\ 15 U.S.C. 78f(b).
\20\ 15 U.S.C. 78f(b)(5).
\21\ Id.
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In particular, the proposed rule change to allow Users to submit
orders that become eligible for execution beginning at 7:00 a.m. ET,
once the Exchange extends its Early Trading Session hours to begin at
4:00 a.m. ET, will remove impediments to and perfect the mechanism of a
free and open market and national market system and will benefit
investors by continuing to provide Users with the option to activate
their orders for execution beginning at 7:00 a.m. ET and thus the
opportunity to continue to source and access liquidity at a specific
time in which there are additional trading opportunities in the
markets. The Exchange does not believe that the proposed rule change
will present any unique or novel issues nor affect the maintenance of a
fair and orderly market, as many market participants have configured
their systems for trading beginning at 7:00 a.m. ET in line with the
commencement of the early trading sessions on other equities exchanges,
including the Exchange's affiliated equities exchanges.\22\ Rather, the
proposed rule change is designed to benefit investors, as well as
overall liquidity in the Early Trading Session, by providing Users with
the option to continue to activate their orders for execution during
the Early Trading
[[Page 12050]]
Session beginning at 7:00 a.m. ET when the Exchange extends its Early
Trading Session hours. As described above, certain market participants,
such as retail investors and liquidity providers, may be limited in
their ability to source liquidity that is available in the Exchange's
Early Trading Session or choose not to participate in the Early Trading
Session without the availability of a 7:00 a.m. Start designation,
thereby reducing liquidity available to other market participants and
investors. Thus, the proposed rule change will alleviate potential
difficulties for Users that generally begin participating in in the
markets at 7:00 a.m. ET (as these Users would not have to time the
entry of their orders to occur as close to 7:00 a.m. ET as possible),
and will facilitate a fair and orderly market on the Exchange by
allowing retail investors and other market participants to benefit from
trading opportunities present at this specific time during the
Exchange's Early Trading Session. Overall, the proposed rule change
will serve to protect investors and the public interest by providing
Users with greater control over their orders and more flexibility to
carry out their investment strategies and manage their needs based on
market conditions, thereby allowing them to continue to provide
meaningful liquidity and benefit from trading opportunities present on
the Exchange throughout the duration of the Early Trading Session.
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\22\ See supra note 12.
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The proposed rule change will not affect the protection of
investors as it would simply provide Users with the opportunity to
choose whether orders entered for potential execution in the Early
Trading Session will become active at the new 4:00 a.m. ET commencement
of that trading session, or will instead continue to become active at
7:00 a.m. ET, as they do today. The System will continue to accept all
orders eligible for execution during the Early Trading Session
beginning at the early acceptance time, will continue to reject the
same list of order types prior to the time an order is eligible to
start trading in the Early Trading Session, and will continue to
process all orders that are queued for participation in the Early
Trading Session in time priority pursuant to Rule 11.1.\23\ That is,
orders with a 7:00 a.m. Start designation will be handled as any
incoming order is handled during the Early Trading Session, and merge,
in time sequence, onto the already active EDGX Order Book for the Early
Trading Session. As described above, a User must continue to select the
appropriate TIF to allow the order to execute in the Early Trading
Session and a port setting step will just permit an order already
marked for execution in the Early Trading Session to become active
later in the Early Trading Session. The proposed rule change does not
extend or otherwise modify any trading hours during which trading is
currently permissible on the Exchange but simply permits Users to
choose to activate their orders at a specific time during an ongoing
trading session.
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\23\ See also supra note 15.
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The Exchange also notes that, as with any order eligible for
trading in the Early Trading Session, market participants must monitor
market conditions to ensure compliance with best execution obligations
\24\ for their orders with a 7:00 a.m. Start designation and will be
able to cancel or modify their orders with a 7:00 a.m. Start time
designation at any time prior to their activation, thus allowing them
to react to market conditions that may cause them to violate their best
execution obligations. FINRA Rule 5310(a)(1) provides that a member
must use reasonable diligence to ascertain the best market for a
security and buy or sell in such market so that the resultant price to
the customer is as favorable as possible under prevailing market
conditions. FINRA Rule 5310(a)(1)(A) states that one of the factors
that will be considered in determining whether a member has used
``reasonable diligence'' is ``the character of the market for the
security (e.g., price, volatility, relative liquidity, and pressure on
available communication).'' \25\ The Exchange believes that Users are
accustomed to this additional analysis and will continue to apply such
in determining whether to designate an activation at 7:00 a.m. ET. The
regulatory guidance with respect to best execution anticipates the
continued evolution of execution venues:
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\24\ A member's best execution obligation may also include
cancelling an order when market conditions deteriorate and could
result in an inferior execution or informing customers where the
execution of their order may be delayed intentionally as the member
utilizes reasonable diligence to ascertain the best market for the
security. See FINRA Rule 5130. See also FINRA Regulatory Notice 15-
46, Best Execution. Guidance on Best Execution Obligations in
Equity, Options, and Fixed Income Markets, (November 2015).
\25\ These characteristics are reflected in the disclosure
requirements mandated by Exchange Rule 3.21 before a Member may
accept an order from a customer for execution in the Pre-Opening,
Post-Closing, and proposed Early Trading Sessions.
[B]est execution is a facts and circumstances determination. A
broker-dealer must consider several factors affecting the quality of
execution, including, for example, the opportunity for price
improvement, the likelihood of execution . . ., the speed of
execution and the trading characteristics of the security, together
with other non-price factors such as reliability and service.\26\
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\26\ See Securities Exchange Act Release No. 43950 (November 17,
2000), 65 FR 75414 (December 1, 2000) (``Disclosure of Order
Execution and Routing Practices release'').
To the extent there may be best execution obligations at issue,
they are no different than the best execution obligations faced by
brokers in the current market structure, including the current use of
orders that become eligible for execution at the start of the Early
Trading Session, Pre-Opening Session or Regular Trading Hours,
depending on the TIF selected by the User. A User may use continue to
use TIF instructions to forgo a possible execution at the start of one
trading session, or at a 7 a.m. Start time, as proposed, if they
believe doing so is consistent with their best execution obligations as
they anticipate that the market for the security may improve upon the
start of another trading session, or at 7:00 a.m. ET, as proposed.
Applicable best execution guidance contains no formulaic mandate as to
whether or how brokers should direct orders. The optionality created by
the proposed rule change simply represents one tool available to User
to meet their best execution obligations.
The Exchange also notes that Users are required to implement
regulatory risk management controls and procedures that are reasonably
designed to prevent the entry of orders that fail to comply with
regulatory requirements that apply on a pre-order entry basis pursuant
to the Market Access Rule under 15c3-5of the Act.\27\ These pre-trade
controls must, for example, be reasonably designed to assure compliance
with Exchange trading rules and Commission rules under Regulation SHO
\28\ and Regulation NMS.\29\ In accordance with the Market Access Rule,
a User's procedures must be reasonably designed to ensure compliance
with their applicable regulatory requirements, not just at the time the
order is routed to the Exchange, but also at the time the order becomes
eligible for execution.
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\27\ See Securities Exchange Act Release No. 63241 (November 3,
2010), 75 FR 69792 (November 15, 2010) (File no. S7-03-10).
\28\ See e.g., Question 2.6 of the Division of Trading and
Markets: Response to Frequently Asked Questions Concerning
Regulations SHO, available at https://www.sec.gov/divisions/marketreg/mrfaqregsho1204.htm.
\29\ 17 CFR 240.610-611.
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In addition to this, the proposed rule change will not affect the
protection of investors as it is generally consistent
[[Page 12051]]
with Nasdaq Rule 4703(a), as previously approved by the Commission,\30\
which allows participants to designate 7:00 a.m. ET as a time in which
certain orders entered prior to 7:00 a.m. ET may become active during
Nasdaq's early trading session, which likewise commences at 4:00 a.m.
ET. Unlike Nasdaq Rule 4703(a), which limits the types of orders that
may be designated to begin at 7:00 a.m. ET, the proposal will provide
Users with the control and flexibility to designate a 7 a.m. Start time
for any of their same orders currently eligible to execute in the Early
Trading Session, thereby providing the opportunity for all orders
eligible for the Early Trading Session to access the additional
liquidity and execution opportunities present in the markets at this
particular time, as they may today.
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\30\ See supra note 16.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Particularly, 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 will be able
to designate their orders to become eligible for execution during the
Early Trading Session beginning at 7:00 a.m. ET. All Users' orders
submitted with a 7:00 a.m. Start designation will become eligible for
execution at 7:00 a.m. ET in the same time sequence as they are today
and will be subject to the same order type restrictions as are
currently in place. The Exchange also 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, and may promote competition, because the proposed activation
time is substantially similar to that which is currently in place on
Nasdaq, as previously approved by the Commission, and other equities
exchanges currently begin their early trading sessions at 7:00 a.m. ET.
Therefore, the proposal will also allow the Exchange to compete with
those exchanges that allow for a 7:00 a.m. ET start time.
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 filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \31\ and Rule 19b-4(f)(6) thereunder.\32\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \33\ and Rule 19b-
4(f)(6) thereunder.\34\
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\31\ 15 U.S.C. 78s(b)(3)(A)(iii).
\32\ 17 CFR 240.19b-4(f)(6).
\33\ 15 U.S.C. 78s(b)(3)(A).
\34\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change, along with a
brief description and text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \35\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\36\ 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 proposed
rule change may become operative immediately. This will allow the
Exchange to implement the proposal at the same time as the Exchange's
new extended Early Trading Session hours, which the Exchange plans to
launch on March 8, 2021. In seeking this waiver, the Exchange asserts
that this proposal neither introduces any new or novel issues nor
extends or otherwise modifies trading hours during which trading is
currently permissible on the Exchange. Rather, the Exchange states that
this proposal will allow market participants and investors to continue
to submit orders that become eligible for execution at 7:00 a.m. ET, as
they already do today, once the Exchange extends its Early Trading
Session hours to begin at 4:00 a.m. ET. Based on the foregoing, the
Commission believes that allowing this proposed rule change to become
operative upon filing is consistent with the protection of investors
and the public interest. The Commission hereby waives the 30-day
operative delay and designates the proposal operative upon filing.\37\
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\35\ 17 CFR 240.19b-4(f)(6).
\36\ 17 CFR 240.19b-4(f)(6)(iii).
\37\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission 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-2021-010 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-2021-010. 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
[[Page 12052]]
Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal offices 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-2021-010, and should be
submitted on or before March 22, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\38\
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\38\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-04090 Filed 2-26-21; 8:45 am]
BILLING CODE 8011-01-P
