Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 5.34 Relating to Its Fat Finger Check in Connection With Multi-Class Spread Orders, 17428-17432 [2021-06776]

Download as PDF 17428 Federal Register / Vol. 86, No. 62 / Friday, April 2, 2021 / Notices jbell on DSKJLSW7X2PROD with NOTICES risks that could lead to losses. The Wind-down Plan would be triggered by a determination by the Board that recovery efforts have not been, or are unlikely to be, successful in returning DTC to viability as a going concern. Once triggered, the Wind-down Plan sets forth clear mechanisms for the transfer of DTC’s membership and business, and is designed to facilitate continued access to DTC’s critical services and to minimize market impact of the transfer. By establishing the framework and strategy for the execution of the transfer and winddown of DTC in order to facilitate continuous access to its critical services, the Wind-down Plan establishes a plan for the orderly wind-down of DTC. As described above, the proposed rule change would update the R&W Plan to (i) reflect business and product developments, (ii) make certain clarifications, (iii) remove provisions covering certain ‘‘business-as-usual’’ actions, and (iv) make certain technical corrections. By ensuring that material provisions of the Plan are current, clear, and technically correct, DTC believes that the proposed amendments are designed to support the maintenance of the Plan for the recovery and orderly wind-down of the covered clearing agency necessitated by credit losses, liquidity shortfalls, losses from general business risk, or any other losses, and, as such, meets the requirements of Rule 17Ad–22(e)(3)(ii) under the Act.39 Therefore, the proposed changes would help DTC to maintain the Plan in a way that continues to be consistent with the requirements of Rule 17Ad–22(e)(3)(ii). (B) Clearing Agency’s Statement on Burden on Competition DTC does not believe that the proposed rule change would have any impact, or impose any burden, on competition. DTC does not anticipate that the proposal would affect its dayto-day operations under normal circumstances, or in the management of a typical Participant default scenario or non-default event. The R&W Plan was developed and documented in order to satisfy applicable regulatory requirements, as discussed above. The proposal is intended to enhance and update the Plan to ensure it is clear and remains current in the event it is ever necessary to be implemented. The proposed revisions would not effect any changes to the overall structure or operation of the Plan or DTC’s recovery and wind-down strategy as set forth under the current Plan. As such, DTC believes the proposal would not have any impact, or impose any burden, on competition. (C) Clearing Agency’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others DTC has not received or solicited any written comments relating to this proposal. DTC will notify the Commission of any written comments received by DTC. III. Date of Effectiveness of the Proposed Rule Change, and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) 40 of the Act and paragraph (f) 41 of Rule 19b–4 thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– DTC–2021–004 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549. All submissions should refer to File Number SR–DTC–2021–004. 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 (http://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 VerDate Sep<11>2014 Jkt 253001 [FR Doc. 2021–06777 Filed 4–1–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–91431; File No. SR–CBOE– 2021–018] Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 5.34 Relating to Its Fat Finger Check in Connection With Multi-Class Spread Orders March 29, 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 March 17, 2021, Cboe Exchange, Inc. (the ‘‘Exchange’’ or ‘‘Cboe Options’’) 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 Exchange filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. U.S.C 78s(b)(3)(A). 41 17 CFR 240.19b–4(f). 23:04 Apr 01, 2021 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.42 J. Matthew DeLesDernier, Assistant Secretary. 42 17 40 15 39 Id. Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of DTC and on DTCC’s website (http://dtcc.com/legal/sec-rulefilings.aspx). 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–DTC– 2021–004 and should be submitted on or before April 23, 2021. PO 00000 Frm 00080 Fmt 4703 1 15 Sfmt 4703 E:\FR\FM\02APN1.SGM 02APN1 Federal Register / Vol. 86, No. 62 / Friday, April 2, 2021 / Notices the Act 3 and Rule 19b–4(f)(6) thereunder.4 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Cboe Exchange, Inc. (the ‘‘Exchange’’ or ‘‘Cboe Options’’) proposes to amend Rule 5.34 in connection with its fat finger check in connection with MultiClass Spread Orders. The text of the proposed rule change is provided below. (additions are italicized; deletions are [bracketed]) * * * * * Rules of Cboe Exchange, Inc. * * * * * Rule 5.34. Order and Quote Price Protection Mechanisms and Risk Controls (a)–(b) No change. (c) All Orders. (1) Limit Order Fat Finger Check. If a User submits a buy (sell) limit order to the System with a price that is more than a buffer amount above (below) the NBO (NBB) for simple orders or the SNBO (SNBB) for complex orders, the System cancels or rejects the order. The Exchange determines a default buffer amount on a class-by-class basis; however, a User may establish a higher or lower amount than the Exchange default for a class. (A)–(D) No change. (E) This check does not apply to MultiClass Spread Orders. * * * * * The text of the proposed rule change is also available on the Exchange’s website (http://www.cboe.com/ AboutCBOE/CBOELegalRegulatory Home.aspx), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. jbell on DSKJLSW7X2PROD with NOTICES 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. 3 15 4 17 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). VerDate Sep<11>2014 23:04 Apr 01, 2021 Jkt 253001 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 5.34(c)(1), which governs its fat finger check, to provide that the check will not apply to Multi-Class Spread Orders.5 Currently, Rule 5.34 provides for a fat finger check applicable to both simple and complex orders, including those that are routed to PAR. Specifically, Rule 5.34(c)(1) provides that, if a User submits a buy (sell) limit order to the System with a price that is more than a buffer amount above (below) the NBO (NBB) for simple orders or the SNBO (SNBB) for complex orders,6 the System cancels or rejects the order. The Exchange determines a default buffer amount on a class-by-class basis; however, a User may establish a higher or lower amount than the Exchange default for a class. Pursuant to Rule 5.34(c)(1)(B) through (D), the check currently does not apply to complex orders prior to the conclusion of the Opening Process, when no NBBO or SNBBO, as applicable, is available, or to bulk messages or Stop-Limit orders. The Exchange proposes to adopt subparagraph (c)(1)(E) which adds Multi-Class Spread Orders as additional orders to which the fat finger check does not apply. Specifically, a Multi-Class Spread Order is an order or quote to buy a stated number of contracts of a BroadBased Index Option 7 and to sell an equal number, or an equivalent number, of contracts of a related Broad-Based Index Option. For example, a MultiClass Spread Order could be composed of a leg to buy 10 contracts in iShares Russell 2000 ETF (‘‘IWM’’) options and a leg to sell one contract in Russell 2000 Index (‘‘RUT’’) options, as IWM is an exchange-traded fund (‘‘ETF’’) that tracks the performance of the RUT Index and is 1/10th the value of the RUT Index. Therefore, a spread order with a 10:1 ratio in IWM and RUT options creates an equivalent number of contracts of related Broad-Based Index Options and constitutes a Multi-Class Spread Order pursuant to the Exchange Rules. Multi-Class Spread Orders may only execute on the Exchange’s trading 5 See Rules 5.6(c) and 5.85(d). SNBBO is the national best bid and offer for a complex strategy calculated using the NBBO for each component of a complex strategy. See Rule 5.33(a). 7 For the purposes of a Multi-Class Spread Order, a Broad-Based Index Option includes Broad-Based Indexes, ETF and ETNs. See Rule 5.6(c). 6 The PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 17429 floor and are therefore routed to PAR for manual handling (and open outcry trading).8 Specifically, Rule 5.34 provides that the System’s acceptance and execution of orders, quotes, and bulk messages, as applicable, pursuant to the Rules, including Rules 5.31 through 5.33, and orders routed to PAR pursuant to Rule 5.82 are subject to the price protection mechanisms and risk controls (provided in Rule 5.34), as applicable. As such, the price protections and risk mechanisms under Rule 5.34, including the fat finger check, currently apply to Multi-Class Spread Orders upon routing to PAR. Currently, separate servers (i.e., match engines) in the System have direct access to and are able to process market information for individual classes and orders in those classes. For example, one match engine has direct access to the Exchange’s BBO 9 for RUT options and sends that BBO information to the Options Price Reporting Authority (‘‘OPRA’’) for consolidation into and dissemination of the NBBO, and also processes incoming orders (including complex orders) in RUT options, while another match engine does the same for IWM options. Each single-class match engine also continuously intakes away market pricing information (i.e. the ABBO) 10 from OPRA applicable to the class that resides on it. As such, the pricing information regarding the NBBO (that is, the BBO and the ABBO) necessary to calculate the SNBBO applicable to a complex order in an individual class essentially ‘‘lives’’ on a particular match engine, thereby allowing that particular match engine to continuously calculate the SNBBO for 8 Like any other order submitted for open outcry execution, a Multi-Class Spread Order is systematized and submitted to PAR (and the applicable price protection mechanisms and risk controls are applied upon submission to PAR). Once on a PAR workstation, a Floor Broker or PAR Official, as applicable, may then represent the order to a trading crowd. The trading crowd provides a range of the prices at which they are willing to trade. Specifically, a Multi-Class Spread Order may be represented at a trading station at which one of the applicable classes trades (i.e., a primary trading station). Immediately after (or concurrent with) the announcement of the order at the primary trading station, the representing TPH must contact the Designated Primary Market-Maker (DPM), Lead Market-Maker (LMM) or appropriate Exchange staff at the trading station where the other applicable class trades to announce the order to the other trading crowd. See Rule 5.85(d). The Floor Broker may then execute the Multi-Class Spread Order against quotes provided from the crowd, in accordance with priority principles set forth in Rule 5.85(a). 9 The term ‘‘BBO’’ means the best bid or offer disseminated on the Exchange. See Rule 1.1. 10 The term ‘‘ABBO’’ means the best bid(s) or offer(s) disseminated by other Eligible Exchanges (as defined in Rule 5.65) and calculated by the Exchange based on market information the Exchange receives from OPRA. See Rule 1.1. E:\FR\FM\02APN1.SGM 02APN1 17430 Federal Register / Vol. 86, No. 62 / Friday, April 2, 2021 / Notices jbell on DSKJLSW7X2PROD with NOTICES complex orders in that individual class without delay. There is also a separate match engine in the System that is specifically dedicated to cross-class orders. This match engine would process, for example, an incoming RUT/IWM MultiClass Spread Order. Unlike the singleclass match engines, the pricing information regarding the NBBOs that are necessary to calculate the SNBBOs applicable to Multi-Class Spread Orders do not ‘‘live’’ on the cross-class match engine. That is, the cross-class match engine does not have direct access to the BBOs that reside on the Exchange’s single class match engines, nor does it continuously stream the necessary away market ABBO pricing information from OPRA, for each class that could possibly comprise the legs of a Multi-Class Spread Order.11 The Exchange notes that technical limitations prevent the different, single-class match engines from directly sending the Exchange’s BBO information to the cross-class match engine, or the cross-class match engine from continuously receiving ABBO pricing information from OPRA that may be applicable to the leg markets of a Multi-Class Spread Order given the significant amount of ABBO leg market information from OPRA that would be necessary to apply the fat finger check to all possible leg combinations for Multi-Class Spread Orders.12 As a result, the cross-class match engine does not receive all of the necessary pricing information regarding the NBBOs from OPRA for each leg of an incoming Multi-Class Spread Order to generate an SNBBO for that order. Because the cross-class match engine has no NBBOs for the leg markets of an incoming Multi-Class Spread Order at 11 The only NBBO information that the cross-class match engine streams directly from OPRA is for SPX/SPXW. The match engine dedicated to SPX/ SPXW first sends to OPRA the SPX/SPXW BBOs from that match engine, and OPRA then disseminates to the wider market the NBBO pricing information for SPX/SPXW (which are also the BBOs for SPX/SPXW) at which point the cross-class match engine then receives the SPX/SPXW NBBO information from OPRA. 12 The Exchange notes that the substantial possible combinations of classes that may comprise Multi-Class Spread Orders results in a significant amount of market information that must be funneled into the one match engine dedicated to cross-class orders. The System does not have unlimited capacity and is unable to directly feed all leg market prices that could potentially comprise a Multi-Class Spread Order into the single cross-class match engine without potentially creating a delay in the cross-class match engine’s processing capacity. The Exchange notes that there are currently 32 different classes eligible to comprise the legs of a Multi-Class Spread Order. The Exchange believes it would be an inefficient use of capacity to stream data for all classes into the crossclass match engine, as most of that information would not be used. VerDate Sep<11>2014 23:04 Apr 01, 2021 Jkt 253001 the time it receives the order, it assumes that the NBBOs applicable to the leg markets of an incoming Multi-Class Spread Order are zero. As such, when the cross-class match engine receives a Multi-Class Spread Order, it then attempts to calculate the SNBBO for the legs of a Multi-Class Spread Order pursuant to Rule 5.33(h)(3). Rule 5.33(h)(3) provides that, in relevant part, if there is a zero NBB and zero NBO, the System replaces the zero NBB with a price equal to one minimum increment and replaces the zero NBO with a price equal to two minimum increments. Such a resulting SNBBO is unlikely to represent the actual market for a MultiClass Spread Order. Therefore, the cross-class match engine is currently unable to determine an SNBBO that accurately reflects leg market prices that comprise Multi-Class Spread Orders. As a result, this match engine regularly rejects Multi-Class Spread Orders that may otherwise be appropriately priced around the current leg market NBBOs. The Exchange has received feedback from Users that the current application of the fat finger check to Multi-Class Spread Orders (which are floor-only) is too limited.13 Indeed, the primary purpose of the fat finger check is to prevent limit orders from executing at potentially erroneous prices upon entry if the limit prices are too far away from the then-current SNBBO. As stated, the System is unable to calculate the SNBBO for the fat finger check in a manner that accurately reflects current leg market prices for Multi-Class Spread Orders due to the technical limitations that prevent the cross-class match engine from receiving all possible NBBOs necessary to calculate the SNBBOs applicable to Multi-Class Spread Orders. As a result, the crossclass match engine calculates SNBBOs for the fat finger check applicable an incoming Multi-Class Spread Order under the assumption that the NBBO values for the orders’ leg markets are zero. That is, it attempts to substitute the minimum increment spread for each leg market of the Multi-Class Spread Order to calculate an SNBBO for the fat finger check and, therefore, the fat finger check applied may not provide the most accurate reflection of the best prices currently available in those leg markets. As a result, the System may reject MultiClass Spread Orders for being too far away from the substitute SNBBO, even though such orders may otherwise be 13 The Exchange notes that such instances and, consequently, User feedback given to the Exchange regarding the fat finger limitations in connection with their Multi-Class Spread Orders, have occurred as a result of the Exchange’s technology migration completed in October 2019. PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 legitimately priced around the leg markets at the time those orders were entered. The Exchange notes that a User’s Multi-Class Spread Orders would still be subject to other price protections already in place on the Exchange. Particularly, all Multi-Class Spread Orders are always subject to manual handling, which permits opportunities for brokers to evaluate the prices of orders based on then-existing market conditions and, thus, creates minimal risk of executions at erroneous prices. Additionally, the System applies various price checks for complex orders, such as: A debit/credit reasonability check (which rejects a complex order that is a limit order for a debit (credit) strategy with a net credit (debit) price that exceeds a pre-set buffer or a market order for a credit strategy that would execute at a net debit price that exceeds a pre-set buffer); 14 and a maximum value acceptable price range check (which rejects an order that is a vertical, true butterfly, or box spread and is a limit order with, or a market order that would execute at, a price that is outside of an acceptable price range, set by the minimum and maximum possible value of the spread, subject to an additional buffer amount).15 Overall, the Exchange believes the proposed rule change will provide additional execution opportunities for Multi-Class Spread Orders while continuing to provide protection against executions at prices that may be erroneous. 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. 14 See Rule 5.34(b)(3). Rule 5.34(b)(5). 16 15 U.S.C. 78f(b). 17 15 U.S.C. 78f(b)(5). 15 See E:\FR\FM\02APN1.SGM 02APN1 jbell on DSKJLSW7X2PROD with NOTICES Federal Register / Vol. 86, No. 62 / Friday, April 2, 2021 / Notices 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 rule change to exclude Multi-Class Spread Orders from the fat finger check removes impediments to and perfects the mechanism of a free and open market and a national market system, and, in general, protects investors and the public interest by providing additional execution opportunities for cross-class orders that may be appropriately priced in connection with current leg market prices. The proposed change is intended to benefit investors, from which the Exchange has received feedback regarding the current limitations of the fat finger check for Multi-Class Spread Orders. The Exchange believes the proposed rule change will permit the System to accept these investors’ orders that may be submitted with prices that accurately reflect current leg markets instead of rejecting them because of the fat finger check’s substitution of NBBO information to calculate an applicable SNBBO due to technical limitations that prevent the cross-class match engine from receiving the pricing information regarding the NBBOs for the applicable leg markets of an incoming Multi-Class Spread Order, as it cannot directly access and continuously intake the same information through the System. As a result, the Exchange believes the proposed rule change may increase execution opportunities for investors by allowing their floor-based orders an opportunity to be manually represented in open outcry instead of being rejected by the System before even arriving at PAR for manual handling.19 Moreover, the Exchange believes that the proposed rule change is consistent with the general protection of investors because, pursuant to Rule 5.34(c)(1)(C), the System currently does not apply the fat finger check in instances in which the SNBBO is not available and the System therefore cannot apply an appropriate buffer. Similarly, due to technical limitations, the SNBBO is not available for Multi-Class Spread Orders and while the System uses an available substitute, this may not accurately reflect current leg market prices. Therefore, the proposed rule change excludes such orders from the fat finger for essentially the same reasons as Rule 5.34(c)(1)(C)—that the SNBBO may not be available in order to provide the 18 Id. 19 See supra note 8. VerDate Sep<11>2014 23:04 Apr 01, 2021 Jkt 253001 System with an accurate measure to which it may apply an appropriate fat finger buffer. Additionally, other price protections and safeguards, such as realtime broker evaluation of floor-based pricing and other System-applied price checks, will continue to apply to MultiClass Spread Orders, and thereby will continue to provide protection against executions at prices that may be erroneous. 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’ Multi-Class Spread Orders will be excluded from the fat finger check in the same manner. The Exchange notes that the Rules currently exclude other types of orders from the fat finger check. Also, as described above, all Users’ Multi-Class Spread Orders will continue to be subject to other specific price controls or safeguards, such as real-time broker evaluation of floor-based pricing and other System-applied price checks, which provide protection against executions at prices that may be erroneous. The Exchange does not believe that the proposed rule change will impose any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act because it relates solely to whether the System will accept certain orders for execution on the Exchange [sic] The Exchange believes the proposed rule change would provide all market participants with additional execution opportunities in connection with their Multi-Class Spread Orders while still providing protection from anomalous or erroneous executions. To the extent that market participants find the proposed exclusion of the fat finger check to their complex strategies more favorable for execution of such orders, other exchanges may adopt functionality to similarly handle such complex strategies. 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. PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 17431 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 20 and Rule 19b–4(f)(6) thereunder.21 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 prior to 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 and Rule 19b–4(f)(6)(iii) thereunder. A proposed rule change filed under Rule 19b–4(f)(6) 22 normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b–4(f)(6)(iii),23 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Exchange states that waiver of the operative delay will allow the Exchange to mitigate as soon as practicable the limitations associated with the fat finger check by permitting the System to accept legitimately priced Multi-Class Spreads Orders that the System currently rejects inappropriately because it uses an SNBBO calculated with substitute NBBO information. The System’s acceptance of these MultiClass Spread Orders will allow additional execution opportunities for these orders. The Exchange notes that Multi-Class Spread Orders will continue to be subject to other price protections and safeguards that serve to protect against executions at prices that may be erroneous. The Commission believes that excluding Multi-Class Spread Orders from the fat finger check will benefit investors by providing execution opportunities for Multi-Class Spread Orders that are priced accurately based on current leg market prices but that the System currently rejects because, as described above, the System determines the SNBBO required by the price check using a substitute NBBO calculation, as provided in Cboe Rule 5.33(h)(3), as a result of system limitations that prevent 20 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). 22 17 CFR 240.19b–4(f)(6). 23 17 CFR 240.19b–4(f)(6)(iii). 21 17 E:\FR\FM\02APN1.SGM 02APN1 17432 Federal Register / Vol. 86, No. 62 / Friday, April 2, 2021 / Notices the cross-class server from receiving BBO and ABBO information for the classes that could be components of a Multi-Class Spread Order. The proposal will allow accurately priced Multi-Class Spread Orders to be represented in open outcry rather than being rejected inappropriately when they are submitted to PAR. The Commission notes that the Exchange has received feedback from investors indicating that the current application of the fat finger check to Multi-Class Spread Orders is too limited. In addition, the Commission notes that Multi-Class Spread Orders, which trade only on the Exchange’s floor, will continue to be subject to other safeguards, including real-time broker evaluation of floorbased pricing and other System-applied price checks that are designed to provide protection against executions at prices that may be erroneous. The Commission also notes that the Exchange will announce the implementation of the proposal to Trading Permit Holders in advance via Trade Desk Notice. For these reasons, the Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest. Accordingly, the Commission hereby waives the 30-day operative delay and designates the proposal operative upon filing.24 At any time within 60 days of the filing of such 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 under Section 19(b)(2)(B) 25 of the Act to determine whether the proposed rule change should be approved or disapproved. jbell on DSKJLSW7X2PROD with NOTICES 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: Jkt 253001 Paper Comments [Release No. 34–91430; File No. SR–FICC– 2021–002] • 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–2021–018. 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 (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–CBOE–2021–018, and should be submitted on or before April 23, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.26 J. Matthew DeLesDernier, Assistant Secretary. BILLING CODE 8011–01–P 24 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). 25 15 U.S.C. 78s(b)(2)(B). 23:04 Apr 01, 2021 SECURITIES AND EXCHANGE COMMISSION [FR Doc. 2021–06776 Filed 4–1–21; 8:45 am] Electronic Comments • Use the Commission’s internet comment form (http://www.sec.gov/ rules/sro.shtml); or VerDate Sep<11>2014 • Send an email to rule-comments@ sec.gov. Please include File Number SR– CBOE–2021–018 on the subject line. 26 17 PO 00000 CFR 200.30–3(a)(12). Frm 00084 Fmt 4703 Sfmt 4703 Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Recovery & Wind-Down Plan March 29, 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 March 23, 2021, Fixed Income Clearing Corporation (‘‘FICC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the clearing agency. FICC filed the proposed rule change pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b–4(f)(4) thereunder.4 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Clearing Agency’s Statement of the Terms of Substance of the Proposed Rule Change The proposed rule change 5 consists of amendments to the R&W Plan to (i) reflect business and product developments, (ii) make certain changes to improve the clarity of the Plan, (iii) remove provisions covering certain ‘‘business-as-usual’’ actions, and (iv) make certain technical corrections, as described in greater detail below. II. Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the clearing agency 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 clearing agency has prepared summaries, set forth in sections A, B, 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b–4(f)(4). 5 Capitalized terms not defined herein are defined in the FICC Government Securities Division (‘‘GSD’’) Rulebook (the ‘‘GSD Rules’’) or the FICC Mortgage-Backed Securities Division (‘‘MBSD’’) Clearing Rules (the ‘‘MBSD Rules,’’ and collectively with the GSD Rules, the ‘‘Rules’’), available at https://www.dtcc.com/legal/rules-and-procedures, or in the Recovery & Wind-down Plan of FICC (the ‘‘R&W Plan’’ or ‘‘Plan’’). 2 17 E:\FR\FM\02APN1.SGM 02APN1

Agencies

[Federal Register Volume 86, Number 62 (Friday, April 2, 2021)]
[Notices]
[Pages 17428-17432]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-06776]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91431; File No. SR-CBOE-2021-018]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Rule 5.34 Relating to Its Fat Finger Check in Connection With Multi-
Class Spread Orders

March 29, 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 March 17, 2021, Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe 
Options'') 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 Exchange 
filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of

[[Page 17429]]

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 Rule 5.34 in connection with its fat finger check in 
connection with Multi-Class Spread Orders. The text of the proposed 
rule change is provided below.
(additions are italicized; deletions are [bracketed])
* * * * *

Rules of Cboe Exchange, Inc.

* * * * *

Rule 5.34. Order and Quote Price Protection Mechanisms and Risk 
Controls

    (a)-(b) No change.
    (c) All Orders.
    (1) Limit Order Fat Finger Check. If a User submits a buy (sell) 
limit order to the System with a price that is more than a buffer 
amount above (below) the NBO (NBB) for simple orders or the SNBO 
(SNBB) for complex orders, the System cancels or rejects the order. 
The Exchange determines a default buffer amount on a class-by-class 
basis; however, a User may establish a higher or lower amount than 
the Exchange default for a class.
    (A)-(D) No change.
    (E) This check does not apply to Multi-Class Spread Orders.
* * * * *
    The text of the proposed rule change is also available on the 
Exchange's website (http://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 5.34(c)(1), which governs its 
fat finger check, to provide that the check will not apply to Multi-
Class Spread Orders.\5\
---------------------------------------------------------------------------

    \5\ See Rules 5.6(c) and 5.85(d).
---------------------------------------------------------------------------

    Currently, Rule 5.34 provides for a fat finger check applicable to 
both simple and complex orders, including those that are routed to PAR. 
Specifically, Rule 5.34(c)(1) provides that, if a User submits a buy 
(sell) limit order to the System with a price that is more than a 
buffer amount above (below) the NBO (NBB) for simple orders or the SNBO 
(SNBB) for complex orders,\6\ the System cancels or rejects the order. 
The Exchange determines a default buffer amount on a class-by-class 
basis; however, a User may establish a higher or lower amount than the 
Exchange default for a class. Pursuant to Rule 5.34(c)(1)(B) through 
(D), the check currently does not apply to complex orders prior to the 
conclusion of the Opening Process, when no NBBO or SNBBO, as 
applicable, is available, or to bulk messages or Stop-Limit orders. The 
Exchange proposes to adopt subparagraph (c)(1)(E) which adds Multi-
Class Spread Orders as additional orders to which the fat finger check 
does not apply.
---------------------------------------------------------------------------

    \6\ The SNBBO is the national best bid and offer for a complex 
strategy calculated using the NBBO for each component of a complex 
strategy. See Rule 5.33(a).
---------------------------------------------------------------------------

    Specifically, a Multi-Class Spread Order is an order or quote to 
buy a stated number of contracts of a Broad-Based Index Option \7\ and 
to sell an equal number, or an equivalent number, of contracts of a 
related Broad-Based Index Option. For example, a Multi-Class Spread 
Order could be composed of a leg to buy 10 contracts in iShares Russell 
2000 ETF (``IWM'') options and a leg to sell one contract in Russell 
2000 Index (``RUT'') options, as IWM is an exchange-traded fund 
(``ETF'') that tracks the performance of the RUT Index and is 1/10th 
the value of the RUT Index. Therefore, a spread order with a 10:1 ratio 
in IWM and RUT options creates an equivalent number of contracts of 
related Broad-Based Index Options and constitutes a Multi-Class Spread 
Order pursuant to the Exchange Rules. Multi-Class Spread Orders may 
only execute on the Exchange's trading floor and are therefore routed 
to PAR for manual handling (and open outcry trading).\8\ Specifically, 
Rule 5.34 provides that the System's acceptance and execution of 
orders, quotes, and bulk messages, as applicable, pursuant to the 
Rules, including Rules 5.31 through 5.33, and orders routed to PAR 
pursuant to Rule 5.82 are subject to the price protection mechanisms 
and risk controls (provided in Rule 5.34), as applicable. As such, the 
price protections and risk mechanisms under Rule 5.34, including the 
fat finger check, currently apply to Multi-Class Spread Orders upon 
routing to PAR.
---------------------------------------------------------------------------

    \7\ For the purposes of a Multi-Class Spread Order, a Broad-
Based Index Option includes Broad-Based Indexes, ETF and ETNs. See 
Rule 5.6(c).
    \8\ Like any other order submitted for open outcry execution, a 
Multi-Class Spread Order is systematized and submitted to PAR (and 
the applicable price protection mechanisms and risk controls are 
applied upon submission to PAR). Once on a PAR workstation, a Floor 
Broker or PAR Official, as applicable, may then represent the order 
to a trading crowd. The trading crowd provides a range of the prices 
at which they are willing to trade. Specifically, a Multi-Class 
Spread Order may be represented at a trading station at which one of 
the applicable classes trades (i.e., a primary trading station). 
Immediately after (or concurrent with) the announcement of the order 
at the primary trading station, the representing TPH must contact 
the Designated Primary Market-Maker (DPM), Lead Market-Maker (LMM) 
or appropriate Exchange staff at the trading station where the other 
applicable class trades to announce the order to the other trading 
crowd. See Rule 5.85(d). The Floor Broker may then execute the 
Multi-Class Spread Order against quotes provided from the crowd, in 
accordance with priority principles set forth in Rule 5.85(a).
---------------------------------------------------------------------------

    Currently, separate servers (i.e., match engines) in the System 
have direct access to and are able to process market information for 
individual classes and orders in those classes. For example, one match 
engine has direct access to the Exchange's BBO \9\ for RUT options and 
sends that BBO information to the Options Price Reporting Authority 
(``OPRA'') for consolidation into and dissemination of the NBBO, and 
also processes incoming orders (including complex orders) in RUT 
options, while another match engine does the same for IWM options. Each 
single-class match engine also continuously intakes away market pricing 
information (i.e. the ABBO) \10\ from OPRA applicable to the class that 
resides on it. As such, the pricing information regarding the NBBO 
(that is, the BBO and the ABBO) necessary to calculate the SNBBO 
applicable to a complex order in an individual class essentially 
``lives'' on a particular match engine, thereby allowing that 
particular match engine to continuously calculate the SNBBO for

[[Page 17430]]

complex orders in that individual class without delay.
---------------------------------------------------------------------------

    \9\ The term ``BBO'' means the best bid or offer disseminated on 
the Exchange. See Rule 1.1.
    \10\ The term ``ABBO'' means the best bid(s) or offer(s) 
disseminated by other Eligible Exchanges (as defined in Rule 5.65) 
and calculated by the Exchange based on market information the 
Exchange receives from OPRA. See Rule 1.1.
---------------------------------------------------------------------------

    There is also a separate match engine in the System that is 
specifically dedicated to cross-class orders. This match engine would 
process, for example, an incoming RUT/IWM Multi-Class Spread Order. 
Unlike the single-class match engines, the pricing information 
regarding the NBBOs that are necessary to calculate the SNBBOs 
applicable to Multi-Class Spread Orders do not ``live'' on the cross-
class match engine. That is, the cross-class match engine does not have 
direct access to the BBOs that reside on the Exchange's single class 
match engines, nor does it continuously stream the necessary away 
market ABBO pricing information from OPRA, for each class that could 
possibly comprise the legs of a Multi-Class Spread Order.\11\ The 
Exchange notes that technical limitations prevent the different, 
single-class match engines from directly sending the Exchange's BBO 
information to the cross-class match engine, or the cross-class match 
engine from continuously receiving ABBO pricing information from OPRA 
that may be applicable to the leg markets of a Multi-Class Spread Order 
given the significant amount of ABBO leg market information from OPRA 
that would be necessary to apply the fat finger check to all possible 
leg combinations for Multi-Class Spread Orders.\12\ As a result, the 
cross-class match engine does not receive all of the necessary pricing 
information regarding the NBBOs from OPRA for each leg of an incoming 
Multi-Class Spread Order to generate an SNBBO for that order. Because 
the cross-class match engine has no NBBOs for the leg markets of an 
incoming Multi-Class Spread Order at the time it receives the order, it 
assumes that the NBBOs applicable to the leg markets of an incoming 
Multi-Class Spread Order are zero. As such, when the cross-class match 
engine receives a Multi-Class Spread Order, it then attempts to 
calculate the SNBBO for the legs of a Multi-Class Spread Order pursuant 
to Rule 5.33(h)(3). Rule 5.33(h)(3) provides that, in relevant part, if 
there is a zero NBB and zero NBO, the System replaces the zero NBB with 
a price equal to one minimum increment and replaces the zero NBO with a 
price equal to two minimum increments. Such a resulting SNBBO is 
unlikely to represent the actual market for a Multi-Class Spread Order. 
Therefore, the cross-class match engine is currently unable to 
determine an SNBBO that accurately reflects leg market prices that 
comprise Multi-Class Spread Orders. As a result, this match engine 
regularly rejects Multi-Class Spread Orders that may otherwise be 
appropriately priced around the current leg market NBBOs.
---------------------------------------------------------------------------

    \11\ The only NBBO information that the cross-class match engine 
streams directly from OPRA is for SPX/SPXW. The match engine 
dedicated to SPX/SPXW first sends to OPRA the SPX/SPXW BBOs from 
that match engine, and OPRA then disseminates to the wider market 
the NBBO pricing information for SPX/SPXW (which are also the BBOs 
for SPX/SPXW) at which point the cross-class match engine then 
receives the SPX/SPXW NBBO information from OPRA.
    \12\ The Exchange notes that the substantial possible 
combinations of classes that may comprise Multi-Class Spread Orders 
results in a significant amount of market information that must be 
funneled into the one match engine dedicated to cross-class orders. 
The System does not have unlimited capacity and is unable to 
directly feed all leg market prices that could potentially comprise 
a Multi-Class Spread Order into the single cross-class match engine 
without potentially creating a delay in the cross-class match 
engine's processing capacity. The Exchange notes that there are 
currently 32 different classes eligible to comprise the legs of a 
Multi-Class Spread Order. The Exchange believes it would be an 
inefficient use of capacity to stream data for all classes into the 
cross-class match engine, as most of that information would not be 
used.
---------------------------------------------------------------------------

    The Exchange has received feedback from Users that the current 
application of the fat finger check to Multi-Class Spread Orders (which 
are floor-only) is too limited.\13\ Indeed, the primary purpose of the 
fat finger check is to prevent limit orders from executing at 
potentially erroneous prices upon entry if the limit prices are too far 
away from the then-current SNBBO. As stated, the System is unable to 
calculate the SNBBO for the fat finger check in a manner that 
accurately reflects current leg market prices for Multi-Class Spread 
Orders due to the technical limitations that prevent the cross-class 
match engine from receiving all possible NBBOs necessary to calculate 
the SNBBOs applicable to Multi-Class Spread Orders. As a result, the 
cross-class match engine calculates SNBBOs for the fat finger check 
applicable an incoming Multi-Class Spread Order under the assumption 
that the NBBO values for the orders' leg markets are zero. That is, it 
attempts to substitute the minimum increment spread for each leg market 
of the Multi-Class Spread Order to calculate an SNBBO for the fat 
finger check and, therefore, the fat finger check applied may not 
provide the most accurate reflection of the best prices currently 
available in those leg markets. As a result, the System may reject 
Multi-Class Spread Orders for being too far away from the substitute 
SNBBO, even though such orders may otherwise be legitimately priced 
around the leg markets at the time those orders were entered.
---------------------------------------------------------------------------

    \13\ The Exchange notes that such instances and, consequently, 
User feedback given to the Exchange regarding the fat finger 
limitations in connection with their Multi-Class Spread Orders, have 
occurred as a result of the Exchange's technology migration 
completed in October 2019.
---------------------------------------------------------------------------

    The Exchange notes that a User's Multi-Class Spread Orders would 
still be subject to other price protections already in place on the 
Exchange. Particularly, all Multi-Class Spread Orders are always 
subject to manual handling, which permits opportunities for brokers to 
evaluate the prices of orders based on then-existing market conditions 
and, thus, creates minimal risk of executions at erroneous prices. 
Additionally, the System applies various price checks for complex 
orders, such as: A debit/credit reasonability check (which rejects a 
complex order that is a limit order for a debit (credit) strategy with 
a net credit (debit) price that exceeds a pre-set buffer or a market 
order for a credit strategy that would execute at a net debit price 
that exceeds a pre-set buffer); \14\ and a maximum value acceptable 
price range check (which rejects an order that is a vertical, true 
butterfly, or box spread and is a limit order with, or a market order 
that would execute at, a price that is outside of an acceptable price 
range, set by the minimum and maximum possible value of the spread, 
subject to an additional buffer amount).\15\ Overall, the Exchange 
believes the proposed rule change will provide additional execution 
opportunities for Multi-Class Spread Orders while continuing to provide 
protection against executions at prices that may be erroneous.
---------------------------------------------------------------------------

    \14\ See Rule 5.34(b)(3).
    \15\ See Rule 5.34(b)(5).
---------------------------------------------------------------------------

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.

[[Page 17431]]

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 rule change to 
exclude Multi-Class Spread Orders from the fat finger check removes 
impediments to and perfects the mechanism of a free and open market and 
a national market system, and, in general, protects investors and the 
public interest by providing additional execution opportunities for 
cross-class orders that may be appropriately priced in connection with 
current leg market prices. The proposed change is intended to benefit 
investors, from which the Exchange has received feedback regarding the 
current limitations of the fat finger check for Multi-Class Spread 
Orders. The Exchange believes the proposed rule change will permit the 
System to accept these investors' orders that may be submitted with 
prices that accurately reflect current leg markets instead of rejecting 
them because of the fat finger check's substitution of NBBO information 
to calculate an applicable SNBBO due to technical limitations that 
prevent the cross-class match engine from receiving the pricing 
information regarding the NBBOs for the applicable leg markets of an 
incoming Multi-Class Spread Order, as it cannot directly access and 
continuously intake the same information through the System. As a 
result, the Exchange believes the proposed rule change may increase 
execution opportunities for investors by allowing their floor-based 
orders an opportunity to be manually represented in open outcry instead 
of being rejected by the System before even arriving at PAR for manual 
handling.\19\
---------------------------------------------------------------------------

    \19\ See supra note 8.
---------------------------------------------------------------------------

    Moreover, the Exchange believes that the proposed rule change is 
consistent with the general protection of investors because, pursuant 
to Rule 5.34(c)(1)(C), the System currently does not apply the fat 
finger check in instances in which the SNBBO is not available and the 
System therefore cannot apply an appropriate buffer. Similarly, due to 
technical limitations, the SNBBO is not available for Multi-Class 
Spread Orders and while the System uses an available substitute, this 
may not accurately reflect current leg market prices. Therefore, the 
proposed rule change excludes such orders from the fat finger for 
essentially the same reasons as Rule 5.34(c)(1)(C)--that the SNBBO may 
not be available in order to provide the System with an accurate 
measure to which it may apply an appropriate fat finger buffer. 
Additionally, other price protections and safeguards, such as real-time 
broker evaluation of floor-based pricing and other System-applied price 
checks, will continue to apply to Multi-Class Spread Orders, and 
thereby will continue to provide protection against executions at 
prices that may be erroneous.

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' Multi-Class 
Spread Orders will be excluded from the fat finger check in the same 
manner. The Exchange notes that the Rules currently exclude other types 
of orders from the fat finger check. Also, as described above, all 
Users' Multi-Class Spread Orders will continue to be subject to other 
specific price controls or safeguards, such as real-time broker 
evaluation of floor-based pricing and other System-applied price 
checks, which provide protection against executions at prices that may 
be erroneous.
    The Exchange does not believe that the proposed rule change will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because it 
relates solely to whether the System will accept certain orders for 
execution on the Exchange [sic] The Exchange believes the proposed rule 
change would provide all market participants with additional execution 
opportunities in connection with their Multi-Class Spread Orders while 
still providing protection from anomalous or erroneous executions. To 
the extent that market participants find the proposed exclusion of the 
fat finger check to their complex strategies more favorable for 
execution of such orders, other exchanges may adopt functionality to 
similarly handle such complex strategies.

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 \20\ and Rule 19b-4(f)(6) thereunder.\21\ 
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 prior to 
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 and Rule 19b-
4(f)(6)(iii) thereunder.
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \21\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \22\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\23\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. The Exchange states that 
waiver of the operative delay will allow the Exchange to mitigate as 
soon as practicable the limitations associated with the fat finger 
check by permitting the System to accept legitimately priced Multi-
Class Spreads Orders that the System currently rejects inappropriately 
because it uses an SNBBO calculated with substitute NBBO information. 
The System's acceptance of these Multi-Class Spread Orders will allow 
additional execution opportunities for these orders. The Exchange notes 
that Multi-Class Spread Orders will continue to be subject to other 
price protections and safeguards that serve to protect against 
executions at prices that may be erroneous. The Commission believes 
that excluding Multi-Class Spread Orders from the fat finger check will 
benefit investors by providing execution opportunities for Multi-Class 
Spread Orders that are priced accurately based on current leg market 
prices but that the System currently rejects because, as described 
above, the System determines the SNBBO required by the price check 
using a substitute NBBO calculation, as provided in Cboe Rule 
5.33(h)(3), as a result of system limitations that prevent

[[Page 17432]]

the cross-class server from receiving BBO and ABBO information for the 
classes that could be components of a Multi-Class Spread Order. The 
proposal will allow accurately priced Multi-Class Spread Orders to be 
represented in open outcry rather than being rejected inappropriately 
when they are submitted to PAR. The Commission notes that the Exchange 
has received feedback from investors indicating that the current 
application of the fat finger check to Multi-Class Spread Orders is too 
limited. In addition, the Commission notes that Multi-Class Spread 
Orders, which trade only on the Exchange's floor, will continue to be 
subject to other safeguards, including real-time broker evaluation of 
floor-based pricing and other System-applied price checks that are 
designed to provide protection against executions at prices that may be 
erroneous. The Commission also notes that the Exchange will announce 
the implementation of the proposal to Trading Permit Holders in advance 
via Trade Desk Notice. For these reasons, the Commission believes that 
waiver of the 30-day operative delay is consistent with the protection 
of investors and the public interest. Accordingly, the Commission 
hereby waives the 30-day operative delay and designates the proposal 
operative upon filing.\24\
---------------------------------------------------------------------------

    \22\ 17 CFR 240.19b-4(f)(6).
    \23\ 17 CFR 240.19b-4(f)(6)(iii).
    \24\ 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).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such 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 under 
Section 19(b)(2)(B) \25\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CBOE-2021-018 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-2021-018. 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 (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-CBOE-2021-018, and should be submitted 
on or before April 23, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
---------------------------------------------------------------------------

    \26\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-06776 Filed 4-1-21; 8:45 am]
BILLING CODE 8011-01-P