Justia Agencies And Commissions Securities And Exchange Commission Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing of a Proposed Rule Change Relating to the Exchange's Process for Re-Opening Securities Listed on Other National Securities Exchanges Following the Resumption of Trading After a Halt, Suspension, or Pause During the Early Trading Session, Pre-Opening Session, or After Hours Trading Session, 26583-26586 [2021-10172]

Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing of a Proposed Rule Change Relating to the Exchange's Process for Re-Opening Securities Listed on Other National Securities Exchanges Following the Resumption of Trading After a Halt, Suspension, or Pause During the Early Trading Session, Pre-Opening Session, or After Hours Trading Session, 26583-26586 [2021-10172]

Download as PDF Federal Register / Vol. 86, No. 92 / Friday, May 14, 2021 / Notices 19b–4 thereunder,2 a proposed rule change to: (1) Provide the Exchange the authority to facilitate a Trading Halt Auction if a security has not reopened following a Level 1 or Level 2 trading halt due to extraordinary market volatility under Rule 7.12 (‘‘MWCB Halt’’) by 3:30 p.m.; (2) widen the Auction Collar for an Exchangefacilitated Trading Halt Auction following an MWCB Halt; (3) provide that certain DMM Interest would not be cancelled following an Exchangefacilitated Auction; and (4) change the Auction Reference Price for Exchangefacilitated Core Open Auctions. The proposed rule change was published for comment in the Federal Register on November 12 2020.3 On December 18, 2020, pursuant to Section 19(b)(2) of the Act,4 the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change to February 10, 2020.5 On February 5, 2021, the Exchange filed Amendment No. 1 to the proposed rule change which replaced and superseded the proposed rule change in its entirety.6 On February 10, 2021, the Commission published notice of Amendment No. 1 and instituted proceedings pursuant to Section 19(b)(2)(B) of the Act 7 to determine whether to approve or disapprove the proposed rule change, as modified by Amendment No. 1.8 On March 17, 2021, the Exchange filed Amendment No. 2 to the proposed rule change, which replaced and superseded the proposed rule change, as modified by Amendment No. 1, in its entirety.9 2 17 CFR 240.19b–4. Securities Exchange Act Release No. 90363 (Nov. 5, 2020), 85 FR 71964 (Nov. 12, 2020) (‘‘Notice’’). 4 15 U.S.C. 78s(b)(2). 5 See Securities Exchange Act Release No. 90726 (Dec. 20, 2020), 85 FR 84431 (Dec. 28, 2020). 6 In Amendment No. 1, the Exchange removed one of the proposed changes from the original proposal. Specifically, the Exchange removed the proposed change to adopt a new definition of Auction Reference Price for exchange-facilitated Core Open Auctions and to amend the temporary rule related to such auctions set forth in Commentary .04 to Rule 7.35C. This aspect of the original proposal is now the subject of a separate proposed rule change filed by the Exchange on February 8, 2021 (SR–NYSE–2021–13). 7 15 U.S.C. 78s(b)(2)(B). 8 See Securities Exchange Act Release No. 91095 (Feb. 10, 2021), 86 FR 9978 (Feb. 17, 2020). 9 In Amendment No. 2, the Exchange removed several more proposed changes from the original proposal, as modified by Amendment No. 1. Specifically, the Exchange removed the proposed changes to make permanent the temporary rules pertaining to: (i) Permitting the CEO to determine that the Exchange will facilitate a Trading Halt Auction in one or more securities following a MWCB Halt if the security has not reopened by 3:30 khammond on DSKJM1Z7X2PROD with NOTICES 3 See VerDate Sep<11>2014 19:58 May 13, 2021 Jkt 253001 The Commission has received no comments on the proposed rule change. Section 19(b)(2) of the Act 10 provides that, after initiating proceedings, the Commission shall issue an order approving or disapproving the proposed rule change not later than 180 days after the date of publication of notice of filing of the proposed rule change. The Commission may extend the period for issuing an order approving or disapproving the proposed rule change, however, by not more than 60 days if the Commission determines that a longer period is appropriate and publishes the reasons for such determination. The proposed rule change was published for comment in the Federal Register on November 12 2020.11 The 180th day after publication of the Notice is May 11, 2021. The Commission is extending the time period for approving or disapproving the proposal for an additional 60 days. The Commission finds it appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change as amended by Amendment No. 2. Accordingly, the Commission, pursuant to Section 19(b)(2) of the Act,12 designates July 10, 2021, as the date by which the Commission shall either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change (File No. SR–NYSE–2020–89). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–10174 Filed 5–13–21; 8:45 am] BILLING CODE 8011–01–P p.m. Eastern Time, and (ii) establishing wider Auction Collars for Trading Halt Auctions following a MWCB Halt. 10 15 U.S.C. 78s(b)(2). 11 See supra note 3. 12 Id. 13 17 CFR 200.30–3(a)(31). PO 00000 Frm 00127 Fmt 4703 Sfmt 4703 26583 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–91804; File No. SR– CboeBYX–2021–012] Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing of a Proposed Rule Change Relating to the Exchange’s Process for ReOpening Securities Listed on Other National Securities Exchanges Following the Resumption of Trading After a Halt, Suspension, or Pause During the Early Trading Session, PreOpening Session, or After Hours Trading Session May 10, 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 April 26, 2021, Cboe BYX Exchange, Inc. (‘‘Exchange’’ or ‘‘BYX’’) 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 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 The Exchange proposes rule change to amend the Exchange’s process for reopening securities listed on other national securities exchanges following the resumption of trading after a halt, suspension, or pause during the Early Trading Session, Pre-Opening Session, or After Hours Trading Session. The text of the proposed rule change is also available on the Exchange’s website (https://markets.cboe.com/us/ equities/regulation/rule_filings/byx/), 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 1 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. E:\FR\FM\14MYN1.SGM 14MYN1 26584 Federal Register / Vol. 86, No. 92 / Friday, May 14, 2021 / Notices 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 khammond on DSKJM1Z7X2PROD with NOTICES The purpose of the proposed rule change is to amend the Exchange’s process for re-opening securities listed on other national securities exchanges following the resumption of trading after a halt, suspension, or pause during the Early Trading Session,3 Pre-Opening Session,4 or After Hours Trading Session.5 BYX Rule 11.23 describes the Exchange’s opening process for securities listed on other national securities exchanges, including the process for re-opening such securities following the resumption of trading after a halt, suspension, or pause. On November 5, 2020, the Exchange filed a proposed rule change to amend its reopening process pursuant to BYX Rule 11.23 for securities listed on the New York Stock Exchange LLC (‘‘NYSE’’) following the resumption of trading after a halt, suspension, or pause during the Early Trading Session, Pre-Opening Session, or After Hours Trading Session.6 That filing was approved by the Commission on December 28, 2020.7 The Exchange now proposes to further amend BYX Rule 11.23 to adopt a harmonized re-opening process for securities listed on NYSE (‘‘Tape A’’), securities listed on exchanges other than The Nasdaq Stock Market LLC (‘‘Nasdaq’’) and NYSE (‘‘Tape B’’); and securities listed on Nasdaq (‘‘Tape C’’) following the resumption of trading after a halt, suspension, or pause during the Early Trading Session, Pre-Opening Session, or After Hours Trading Session. The Exchange believes that the proposed harmonized process for Tape A, B, and C securities would simplify its procedures and provide a more effective re-opening process for securities that 3 The term ‘‘Early Trading Session’’ means the time between 7:00 a.m. and 8:00 a.m. Eastern Time. See BYX Rule 1.5(ee). 4 The term ‘‘Pre-Opening Session’’ means the time between 8:00 a.m. and 9:30 a.m. Eastern Time. See BYX Rule 1.5(r). 5 The term ‘‘After Hours Trading Session’’ means the time between 4:00 p.m. and 8:00 p.m. Eastern Time. See BYX Rule 1.5(c). 6 See Securities Exchange Act Release No. 90421 (November 13, 2020), 85 FR 73826 (November 19, 2020) (SR–CboeBYX–2020–032). 7 See Securities Exchange Act Release No. 90804 (December 28, 2020), 86 FR 158 (January 4, 2021) (Approval Order). VerDate Sep<11>2014 19:58 May 13, 2021 Jkt 253001 resume trading outside of Regular Trading Hours.8 As amended pursuant to SR– CboeBYX–2020–032, BYX Rule 11.23(e)(3) provides that during the Early Trading Session, Pre-Opening Session, or After Hours Trading Session, Tape A securities that resume trading after a halt, suspension, or pause will be automatically re-opened pursuant to the Exchange’s contingent open procedures, as described in BYX Rule 11.23(d), after one second has passed following the Exchange’s receipt of the first NBBO following such resumption of trading. This rule was adopted to automate the prior manual process that would otherwise be used to initiate the reopening of Tape A securities when NYSE was not open for trading. Consistent with that intent, the Exchange proposed to continue to reopen Tape A securities using the same contingent open procedures that would apply when the Exchange manually initiated its re-opening process pursuant to BYX Rule 11.23(e)(2). As a result, when the Exchange re-opens Tape A securities during pre- and post-market trading sessions today, orders are handled in time sequence and placed on the BYX Book, routed, cancelled, or executed in accordance with the terms of the order. This differs from the standard processed used by the Exchange during Regular Trading Hours, where the Exchange seeks to execute queued orders at the midpoint of the national best bid or offer (‘‘NBBO’’).9 After additional consideration, the Exchange believes that market participants and investors would be better served by utilizing its standard midpoint re-opening in these circumstances as doing so would promote greater consistency with the process used by the Exchange in other circumstances and may generally provide executions that better reflect the applicable market for the security. The Exchange therefore proposes to amend BYX Rule 11.23(e) such that the process for re-opening Tape A securities after the Exchange has determined to initiate a re-opening would generally mirror the standard process described in BYX Rule 11.23(e)(1), which as discussed is designed to provide an execution at the midpoint of the NBBO. The determination of whether to re-open such Tape A securities would, however, continue to follow the process discussed in SR–CboeBYX–2020–032. Thus, during the Early Trading Session, Pre8 The term ‘‘Regular Trading Hours’’ means the time between 9:30 a.m. and 4:00 p.m. Eastern Time. See BYX Rule 1.5(w). 9 See BYX Rule 11.23(e)(1). PO 00000 Frm 00128 Fmt 4703 Sfmt 4703 Opening Session, or After Hours Trading Session, the re-opening process for Tape A securities would occur at the midpoint of the NBBO after one second has passed following the Exchange’s receipt of the first NBBO following the resumption of trading after a halt, suspension, or pause. Although the Exchange has determined to use a midpoint re-opening process similar to that currently described in BYX Rule 11.23(e)(1), for the reasons discussed in SR–CboeBYX–2020–032, it remains important that the trigger for initiating this process outside of Regular Trading Hours not be tied to the resumption of trading on the primary listing market as NYSE does not trade its listed securities at times when the Exchange is open for pre- and post-market trading. In addition, the Exchange proposes to amend the process for re-opening Tape B and C securities to mirror the proposed process for Tape A securities, except that the Exchange would require the primary listing market to have begun quoting the security before it initiates its own re-opening process. As explained in SR–CboeBYX–2020–032, the Exchange amended BYX Rule 11.23 to permit Tape A securities listed on NYSE to re-open based on quoting activity on other national securities exchanges during pre- and post-market trading when NYSE does not trade its listed securities. However, this limitation does not exist for Tape B or C securities as the applicable primary listing markets for those securities each offer pre- and post-market trading sessions where market participants can trade their listed securities.10 As a result, the Exchange believes that it is desirable for Tape B and C securities to be opened on the Exchange only after the primary listing exchange has begun trading its listed securities, consistent with the current BYX Rule 11.23(e), which would continue to be applied during Regular Trading Hours. However, similar to the proposed process for reopening Tape A securities, the Exchange would simplify the triggers for reopening trading pursuant to BYX Rule 11.23(e)(1) such that its re-opening process for Tape B and C securities during the Early Trading Session, PreOpening Session, and After Hours Trading Session would occur at the midpoint of the NBBO after one second has passed following the publication of the first two-sided quotation by the listing exchange following the resumption of trading after a halt, suspension, or pause. In its effort to 10 See Nasdaq Rules, Equity 1, Section 1(a)(9); NYSE Arca, Inc. Rule 7.34–E(a); NYSE American LLC Rule 7.34E(a). E:\FR\FM\14MYN1.SGM 14MYN1 Federal Register / Vol. 86, No. 92 / Friday, May 14, 2021 / Notices simplify the re-opening process employed during these timeframes, the Exchange would not retain a separate trigger to allow the re-opening process to be initiated immediately when the Exchange receives both a two-sided quotation and a trade from the listing exchange. Finally, the Exchange proposes to make a number of structural changes to BYX Rule 11.23(e) to facilitate the amendments described above. First, the Exchange proposes to structure BYX Rule 11.23(e)(1) such that it would contain subparagraphs (A), (B), and (C), which each would describe applicable differences between the Exchange’s opening process at the beginning of the Regular Trading Session, as described in BYX Rule 11.23(a)(2) and (b), and the reopening process employed by the Exchange after a halt. As amended, (1) BYX Rule 11.23(e)(1)(A) would describe the types of orders that are eligible for participation in the re-opening process; (2) BYX Rule 11.23(e)(2)(B) would describe the Exchange’s current reopening process, which the Exchange now proposes to limit to Regular Trading Hours; and (3) BYX Rule 11.23(e)(2)(C) would contain language discussed above that describes the Exchange’s re-opening process during the Early Trading Session, Pre-Opening Session, or After Hour Trading Session, i.e., for Tape A, B, and C securities.11 Second, the Exchange proposes to amend BYX Rule 11.23(e)(2) to reflect the changes discussed above. As amended, the lead in to BYX Rule 11.23(e)(2) would state that this section applies where the conditions required to establish the price of the re-opening process in the now restructured BYX Rule 11.23(e)(1)(B) or (C) have not occurred, which reflects the now renumbered sections of the rule, including language that is in current BYX Rule 11.23(e)(1) and BYX Rule 11.23(e)(3).12 khammond on DSKJM1Z7X2PROD with NOTICES 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the 11 The Exchange would also eliminate BYX Rule 11.23(e)(3), which currently addresses the reopening of Tape A securities listed on NYSE during pre- and post-market trading. As discussed, the Exchange is proposing to harmonize the process for re-opening Tape A, B, and C securities outside of Regular Trading Hours, and the harmonized process discussed in this proposed rule change would be described in BYX Rule 11.23(e)(2)(C). 12 The Exchange would also eliminate language that states that this section applies when the security has not otherwise been re-opened for trading on the Exchange pursuant to BYX Rule 11.23(e)(3). As discussed, the content of BYX Rule 11.23(e)(3) would be moved to BYX Rule 11.23(e)(1)(C) with further amendments as discussed herein. VerDate Sep<11>2014 19:58 May 13, 2021 Jkt 253001 requirements of Section 6(b) of the Act,13 in general, and Section 6(b)(5) of the Act,14 in particular, in that it is designed to remove impediments to and perfect the mechanism of a free and open market and a national market system, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest and not to permit unfair discrimination between customers, issuers, brokers, or dealers. The Exchange believes that the proposed rule change is consistent with the protection of investors and the public interest as it would implement a streamlined process for re-opening Tape A, B, and C securities during the Early Trading Session, Pre-Opening Session, or After Hours Trading Session. The Exchange currently employs different processes for re-opening Tape A, B, and C securities during pre- and post-market trading. The Exchange believes, however, that market participants would be better served by a harmonized process that: (1) Ensures that the Exchange’s automated reopening process executes orders at the midpoint of the NBBO; and (2) eliminates unnecessary distinctions between the process utilized for Tape A, B, and C securities. Executing the Exchange’s re-opening process during pre- and post-market trading at the midpoint of the NBBO is beneficial to market participants as the NBBO midpoint may more closely reflect market prices and conditions for the security being re-opened. As a result, the Exchange believes that using the NBBO midpoint to price its re-opening process for all securities would help to promote a fair and orderly market. In addition, using generally consistent triggers for initiating the Exchange’s reopening process in Tape A, B, and C securities that resume trading during pre- and post-market trading sessions would reduce the overall complexity of the re-opening process employed during these timeframes. The Exchange notes, however, that it would nevertheless require the primary listing market to begin trading its own securities prior to re-opening trading on the Exchange in Tape B and C securities. This limitation would not apply to Tape A securities that NYSE does not trade outside of its regular trading session as doing so would require unnecessary and inefficient manual intervention by the Exchange to manually initiate trading, as was the case prior to the filing and Commission approval of SR–CboeBYX– 2020–032. The Exchange believes that this distinction continues to be 13 15 14 15 PO 00000 U.S.C. 78f(b). U.S.C. 78f(b)(5). Frm 00129 Fmt 4703 Sfmt 4703 26585 appropriate as it is based on applicable differences between each primary listing market’s hours of operation and would continue to promote a more streamlined automated process for initiating the reopening process in Tape A securities at times when NYSE does not trade its own listed securities. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change would impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change is designed to facilitate a more efficient and harmonized re-opening process for all securities that resume trading outside of Regular Trading Hours, and is not designed to address any competitive issues. All members would have their orders handled in the same manner based on the proposed changes to the Exchange’s re-opening process, and other national securities exchanges are free to adopt the same or similar processes if they believe that the proposed process is beneficial for their own members. The Exchange therefore does not believe that the proposed rule change would have any significant impact on competition. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission will: A. By order approve or disapprove such proposed rule change, or B. institute proceedings to determine whether the proposed rule change should be 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: E:\FR\FM\14MYN1.SGM 14MYN1 26586 Federal Register / Vol. 86, No. 92 / Friday, May 14, 2021 / Notices 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– CboeBYX–2021–012 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. khammond on DSKJM1Z7X2PROD with NOTICES All submissions should refer to File Number SR–CboeBYX–2021–012. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549 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–CboeBYX–2021–012 and should be submitted on or before June 4, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–10172 Filed 5–13–21; 8:45 am] BILLING CODE 8011–01–P 15 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 19:58 May 13, 2021 Jkt 253001 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–91833; File No. SR–OCC– 2021–005] Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Concerning The Options Clearing Corporation’s Synthetic Futures Model May 10, 2021. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’ or ‘‘Exchange Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on April 29, 2021, The Options Clearing Corporation (‘‘OCC’’) 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 OCC. OCC filed the proposed rule change pursuant to Section 19(b)(3)(A) 3 of the Act and Rule 19b–4(f)(4)(ii) 4 thereunder so that the proposal was effective upon filing with the Commission. 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 OCC is filing a proposed rule change to expand the use of an existing OCC margin model. The proposed changes to OCC’s STANS Methodology Description are contained in confidential Exhibit 5 of filing SR–OCC–2021–005. Material proposed to be added to the STANS Methodology Description as currently in effect is underlined and material proposed to be deleted is marked in strikethrough text. All capitalized terms not defined herein have the same meaning as set forth in the OCC ByLaws and Rules.5 II. Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, OCC 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 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)(ii). 5 OCC’s By-Laws and Rules can be found on OCC’s public website: https://www.theocc.com/ Company-Information/Documents-and-Archives/ By-Laws-and-Rules. 2 17 PO 00000 Frm 00130 Fmt 4703 Sfmt 4703 in Item IV below. OCC has prepared summaries, set forth in sections (A), (B), and (C) below, of the most significant aspects of these statements. (A) Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change (1) Purpose Background In 2019, OCC implemented a new model for Volatility Index Futures.6 The enhanced model included: (1) The daily re-estimation of prices and correlations using ‘‘synthetic’’ futures; 7 (2) an enhanced statistical distribution for modeling price returns for synthetic futures (i.e., an asymmetric Normal Reciprocal Inverse Gaussian (or ‘‘NRIG’’) distribution); and (3) a new anti-procyclical floor for variance estimates. The main feature of the enhanced model was the replacement of the use of the underlying index itself as a risk factor 8 (e.g., the VIX) with risk factors that are based on observed futures prices (i.e., the ‘‘synthetic’’ futures contracts). These risk factors are then used in the generation of Monte Carlo scenarios for the futures by using volatility and correlations obtained from the existing simulation models in OCC’s propriety margin system, the System for Theoretical Analysis and Numerical Simulations (‘‘STANS’’).9 Additionally, the model has the ability to accommodate negative prices and interest rates. On July 10, 2020, OCC filed a proposed rule change to expand the use of the model, currently known as the ‘‘Synthetic Futures Model,’’ to Cboe’s 6 See Securities Exchange Act Release No. 85870 (May 15, 2019), 84 FR 23096 (May 21, 2019) (SR– OCC–2019–801) and Securities Exchange Act Release No. 85873 (May 16, 2019), 84 FR 23620 (May 16, 2019) (SR–OCC–2019–002). Certain indices are designed to measure the volatility implied by the prices of options on a particular reference index or asset (‘‘Volatility Indexes’’). For example, the Cboe Volatility Index (‘‘VIX’’) is designed to measure the 30-day expected volatility of the Standard & Poor’s 500 index (‘‘SPX’’). OCC clears futures contracts on Volatility Indexes. These futures contracts are referred to herein as ‘‘Volatility Index Futures.’’ 7 A ‘‘synthetic’’ futures time series, for the intended purposes of OCC, relates to a uniform substitute for a time series of daily settlement prices for actual futures contracts, which persists over many expiration cycles and thus can be used as a basis for econometric analysis. 8 A ‘‘risk factor’’ within OCC’s margin system may be defined as a product or attribute whose historical data is used to estimate and simulate the risk for an associated product. 9 See Securities Exchange Act Release No. 53322 (February 15, 2006), 71 FR 9403 (February 23, 2006) (SR–OCC–2004–20). A detailed description of the STANS methodology is available at https:// optionsclearing.com/risk-management/margins/. E:\FR\FM\14MYN1.SGM 14MYN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 86, Number 92 (Friday, May 14, 2021)]
[Notices]
[Pages 26583-26586]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-10172]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91804; File No. SR-CboeBYX-2021-012]


Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of 
Filing of a Proposed Rule Change Relating to the Exchange's Process for 
Re-Opening Securities Listed on Other National Securities Exchanges 
Following the Resumption of Trading After a Halt, Suspension, or Pause 
During the Early Trading Session, Pre-Opening Session, or After Hours 
Trading Session

May 10, 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 April 26, 2021, Cboe BYX Exchange, Inc. (``Exchange'' or ``BYX'') 
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 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

    The Exchange proposes rule change to amend the Exchange's process 
for re-opening securities listed on other national securities exchanges 
following the resumption of trading after a halt, suspension, or pause 
during the Early Trading Session, Pre-Opening Session, or After Hours 
Trading Session.
    The text of the proposed rule change is also available on the 
Exchange's website (https://markets.cboe.com/us/equities/regulation/rule_filings/byx/), 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

[[Page 26584]]

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 purpose of the proposed rule change is to amend the Exchange's 
process for re-opening securities listed on other national securities 
exchanges following the resumption of trading after a halt, suspension, 
or pause during the Early Trading Session,\3\ Pre-Opening Session,\4\ 
or After Hours Trading Session.\5\ BYX Rule 11.23 describes the 
Exchange's opening process for securities listed on other national 
securities exchanges, including the process for re-opening such 
securities following the resumption of trading after a halt, 
suspension, or pause. On November 5, 2020, the Exchange filed a 
proposed rule change to amend its re-opening process pursuant to BYX 
Rule 11.23 for securities listed on the New York Stock Exchange LLC 
(``NYSE'') following the resumption of trading after a halt, 
suspension, or pause during the Early Trading Session, Pre-Opening 
Session, or After Hours Trading Session.\6\ That filing was approved by 
the Commission on December 28, 2020.\7\ The Exchange now proposes to 
further amend BYX Rule 11.23 to adopt a harmonized re-opening process 
for securities listed on NYSE (``Tape A''), securities listed on 
exchanges other than The Nasdaq Stock Market LLC (``Nasdaq'') and NYSE 
(``Tape B''); and securities listed on Nasdaq (``Tape C'') following 
the resumption of trading after a halt, suspension, or pause during the 
Early Trading Session, Pre-Opening Session, or After Hours Trading 
Session. The Exchange believes that the proposed harmonized process for 
Tape A, B, and C securities would simplify its procedures and provide a 
more effective re-opening process for securities that resume trading 
outside of Regular Trading Hours.\8\
---------------------------------------------------------------------------

    \3\ The term ``Early Trading Session'' means the time between 
7:00 a.m. and 8:00 a.m. Eastern Time. See BYX Rule 1.5(ee).
    \4\ The term ``Pre-Opening Session'' means the time between 8:00 
a.m. and 9:30 a.m. Eastern Time. See BYX Rule 1.5(r).
    \5\ The term ``After Hours Trading Session'' means the time 
between 4:00 p.m. and 8:00 p.m. Eastern Time. See BYX Rule 1.5(c).
    \6\ See Securities Exchange Act Release No. 90421 (November 13, 
2020), 85 FR 73826 (November 19, 2020) (SR-CboeBYX-2020-032).
    \7\ See Securities Exchange Act Release No. 90804 (December 28, 
2020), 86 FR 158 (January 4, 2021) (Approval Order).
    \8\ The term ``Regular Trading Hours'' means the time between 
9:30 a.m. and 4:00 p.m. Eastern Time. See BYX Rule 1.5(w).
---------------------------------------------------------------------------

    As amended pursuant to SR-CboeBYX-2020-032, BYX Rule 11.23(e)(3) 
provides that during the Early Trading Session, Pre-Opening Session, or 
After Hours Trading Session, Tape A securities that resume trading 
after a halt, suspension, or pause will be automatically re-opened 
pursuant to the Exchange's contingent open procedures, as described in 
BYX Rule 11.23(d), after one second has passed following the Exchange's 
receipt of the first NBBO following such resumption of trading. This 
rule was adopted to automate the prior manual process that would 
otherwise be used to initiate the re-opening of Tape A securities when 
NYSE was not open for trading. Consistent with that intent, the 
Exchange proposed to continue to re-open Tape A securities using the 
same contingent open procedures that would apply when the Exchange 
manually initiated its re-opening process pursuant to BYX Rule 
11.23(e)(2). As a result, when the Exchange re-opens Tape A securities 
during pre- and post-market trading sessions today, orders are handled 
in time sequence and placed on the BYX Book, routed, cancelled, or 
executed in accordance with the terms of the order. This differs from 
the standard processed used by the Exchange during Regular Trading 
Hours, where the Exchange seeks to execute queued orders at the 
midpoint of the national best bid or offer (``NBBO'').\9\ After 
additional consideration, the Exchange believes that market 
participants and investors would be better served by utilizing its 
standard midpoint re-opening in these circumstances as doing so would 
promote greater consistency with the process used by the Exchange in 
other circumstances and may generally provide executions that better 
reflect the applicable market for the security.
---------------------------------------------------------------------------

    \9\ See BYX Rule 11.23(e)(1).
---------------------------------------------------------------------------

    The Exchange therefore proposes to amend BYX Rule 11.23(e) such 
that the process for re-opening Tape A securities after the Exchange 
has determined to initiate a re-opening would generally mirror the 
standard process described in BYX Rule 11.23(e)(1), which as discussed 
is designed to provide an execution at the midpoint of the NBBO. The 
determination of whether to re-open such Tape A securities would, 
however, continue to follow the process discussed in SR-CboeBYX-2020-
032. Thus, during the Early Trading Session, Pre-Opening Session, or 
After Hours Trading Session, the re-opening process for Tape A 
securities would occur at the midpoint of the NBBO after one second has 
passed following the Exchange's receipt of the first NBBO following the 
resumption of trading after a halt, suspension, or pause. Although the 
Exchange has determined to use a midpoint re-opening process similar to 
that currently described in BYX Rule 11.23(e)(1), for the reasons 
discussed in SR-CboeBYX-2020-032, it remains important that the trigger 
for initiating this process outside of Regular Trading Hours not be 
tied to the resumption of trading on the primary listing market as NYSE 
does not trade its listed securities at times when the Exchange is open 
for pre- and post-market trading.
    In addition, the Exchange proposes to amend the process for re-
opening Tape B and C securities to mirror the proposed process for Tape 
A securities, except that the Exchange would require the primary 
listing market to have begun quoting the security before it initiates 
its own re-opening process. As explained in SR-CboeBYX-2020-032, the 
Exchange amended BYX Rule 11.23 to permit Tape A securities listed on 
NYSE to re-open based on quoting activity on other national securities 
exchanges during pre- and post-market trading when NYSE does not trade 
its listed securities. However, this limitation does not exist for Tape 
B or C securities as the applicable primary listing markets for those 
securities each offer pre- and post-market trading sessions where 
market participants can trade their listed securities.\10\ As a result, 
the Exchange believes that it is desirable for Tape B and C securities 
to be opened on the Exchange only after the primary listing exchange 
has begun trading its listed securities, consistent with the current 
BYX Rule 11.23(e), which would continue to be applied during Regular 
Trading Hours. However, similar to the proposed process for re-opening 
Tape A securities, the Exchange would simplify the triggers for re-
opening trading pursuant to BYX Rule 11.23(e)(1) such that its re-
opening process for Tape B and C securities during the Early Trading 
Session, Pre-Opening Session, and After Hours Trading Session would 
occur at the midpoint of the NBBO after one second has passed following 
the publication of the first two-sided quotation by the listing 
exchange following the resumption of trading after a halt, suspension, 
or pause. In its effort to

[[Page 26585]]

simplify the re-opening process employed during these timeframes, the 
Exchange would not retain a separate trigger to allow the re-opening 
process to be initiated immediately when the Exchange receives both a 
two-sided quotation and a trade from the listing exchange.
---------------------------------------------------------------------------

    \10\ See Nasdaq Rules, Equity 1, Section 1(a)(9); NYSE Arca, 
Inc. Rule 7.34-E(a); NYSE American LLC Rule 7.34E(a).
---------------------------------------------------------------------------

    Finally, the Exchange proposes to make a number of structural 
changes to BYX Rule 11.23(e) to facilitate the amendments described 
above. First, the Exchange proposes to structure BYX Rule 11.23(e)(1) 
such that it would contain subparagraphs (A), (B), and (C), which each 
would describe applicable differences between the Exchange's opening 
process at the beginning of the Regular Trading Session, as described 
in BYX Rule 11.23(a)(2) and (b), and the re-opening process employed by 
the Exchange after a halt. As amended, (1) BYX Rule 11.23(e)(1)(A) 
would describe the types of orders that are eligible for participation 
in the re-opening process; (2) BYX Rule 11.23(e)(2)(B) would describe 
the Exchange's current re-opening process, which the Exchange now 
proposes to limit to Regular Trading Hours; and (3) BYX Rule 
11.23(e)(2)(C) would contain language discussed above that describes 
the Exchange's re-opening process during the Early Trading Session, 
Pre-Opening Session, or After Hour Trading Session, i.e., for Tape A, 
B, and C securities.\11\ Second, the Exchange proposes to amend BYX 
Rule 11.23(e)(2) to reflect the changes discussed above. As amended, 
the lead in to BYX Rule 11.23(e)(2) would state that this section 
applies where the conditions required to establish the price of the re-
opening process in the now restructured BYX Rule 11.23(e)(1)(B) or (C) 
have not occurred, which reflects the now renumbered sections of the 
rule, including language that is in current BYX Rule 11.23(e)(1) and 
BYX Rule 11.23(e)(3).\12\
---------------------------------------------------------------------------

    \11\ The Exchange would also eliminate BYX Rule 11.23(e)(3), 
which currently addresses the re-opening of Tape A securities listed 
on NYSE during pre- and post-market trading. As discussed, the 
Exchange is proposing to harmonize the process for re-opening Tape 
A, B, and C securities outside of Regular Trading Hours, and the 
harmonized process discussed in this proposed rule change would be 
described in BYX Rule 11.23(e)(2)(C).
    \12\ The Exchange would also eliminate language that states that 
this section applies when the security has not otherwise been re-
opened for trading on the Exchange pursuant to BYX Rule 11.23(e)(3). 
As discussed, the content of BYX Rule 11.23(e)(3) would be moved to 
BYX Rule 11.23(e)(1)(C) with further amendments as discussed herein.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the requirements of Section 6(b) of the Act,\13\ in general, and 
Section 6(b)(5) of the Act,\14\ in particular, in that it is designed 
to remove impediments to and perfect the mechanism of a free and open 
market and a national market system, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest and not to permit unfair discrimination between 
customers, issuers, brokers, or dealers. The Exchange believes that the 
proposed rule change is consistent with the protection of investors and 
the public interest as it would implement a streamlined process for re-
opening Tape A, B, and C securities during the Early Trading Session, 
Pre-Opening Session, or After Hours Trading Session.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange currently employs different processes for re-opening 
Tape A, B, and C securities during pre- and post-market trading. The 
Exchange believes, however, that market participants would be better 
served by a harmonized process that: (1) Ensures that the Exchange's 
automated re-opening process executes orders at the midpoint of the 
NBBO; and (2) eliminates unnecessary distinctions between the process 
utilized for Tape A, B, and C securities. Executing the Exchange's re-
opening process during pre- and post-market trading at the midpoint of 
the NBBO is beneficial to market participants as the NBBO midpoint may 
more closely reflect market prices and conditions for the security 
being re-opened. As a result, the Exchange believes that using the NBBO 
midpoint to price its re-opening process for all securities would help 
to promote a fair and orderly market. In addition, using generally 
consistent triggers for initiating the Exchange's re-opening process in 
Tape A, B, and C securities that resume trading during pre- and post-
market trading sessions would reduce the overall complexity of the re-
opening process employed during these timeframes. The Exchange notes, 
however, that it would nevertheless require the primary listing market 
to begin trading its own securities prior to re-opening trading on the 
Exchange in Tape B and C securities. This limitation would not apply to 
Tape A securities that NYSE does not trade outside of its regular 
trading session as doing so would require unnecessary and inefficient 
manual intervention by the Exchange to manually initiate trading, as 
was the case prior to the filing and Commission approval of SR-CboeBYX-
2020-032. The Exchange believes that this distinction continues to be 
appropriate as it is based on applicable differences between each 
primary listing market's hours of operation and would continue to 
promote a more streamlined automated process for initiating the re-
opening process in Tape A securities at times when NYSE does not trade 
its own listed securities.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change is 
designed to facilitate a more efficient and harmonized re-opening 
process for all securities that resume trading outside of Regular 
Trading Hours, and is not designed to address any competitive issues. 
All members would have their orders handled in the same manner based on 
the proposed changes to the Exchange's re-opening process, and other 
national securities exchanges are free to adopt the same or similar 
processes if they believe that the proposed process is beneficial for 
their own members. The Exchange therefore does not believe that the 
proposed rule change would have any significant impact on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received on the proposed rule 
change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    A. By order approve or disapprove such proposed rule change, or
    B. institute proceedings to determine whether the proposed rule 
change should be 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:

[[Page 26586]]

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-CboeBYX-2021-012 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-CboeBYX-2021-012. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 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-CboeBYX-2021-012 and 
should be submitted on or before June 4, 2021.
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-10172 Filed 5-13-21; 8:45 am]
BILLING CODE 8011-01-P

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