Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating To Amend Rule 5.33, 48263-48267 [2021-18464]
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Federal Register / Vol. 86, No. 164 / Friday, August 27, 2021 / Notices
the Exchange cannot effectively review
for such conduct without looking at and
evaluating activity regardless of where it
transpires. In addition to its own
surveillance programs, the Exchange
also works with other SROs and
exchanges on intermarket surveillance
related issues. Through its participation
in the Intermarket Surveillance Group
(‘‘ISG’’) 17 the Exchange shares
information and coordinates inquiries
and investigations with other exchanges
designed to address potential
intermarket manipulation and trading
abuses. Accordingly, there is a strong
nexus between the ORF and the
Exchange’s regulatory activities with
respect to customer trading activity of
its Members.
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 not
necessary or appropriate in furtherance
of the purposes of the Act. This
proposal does not create an unnecessary
or inappropriate intra-market burden on
competition because the ORF applies to
all customer activity, thereby raising
regulatory revenue to offset regulatory
expenses. It also supplements the
regulatory revenue derived from noncustomer activity. The Exchange notes,
however, the proposed change is not
designed to address any competitive
issues. Indeed, this proposal does not
create an unnecessary or inappropriate
inter-market burden on competition
because it is a regulatory fee that
supports regulation in furtherance of the
purposes of the Act. The Exchange is
obligated to ensure that the amount of
regulatory revenue collected from the
ORF, in combination with its other
regulatory fees and fines, does not
exceed regulatory costs.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
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The foregoing rule change has become
effective pursuant to Section
17 ISG is an industry organization formed in 1983
to coordinate intermarket surveillance among the
SROs by cooperatively sharing regulatory
information pursuant to a written agreement
between the parties. The goal of the ISG’s
information sharing is to coordinate regulatory
efforts to address potential intermarket trading
abuses and manipulations.
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19(b)(3)(A)(ii) of the Act,18 and Rule
19b–4(f)(2) 19 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. If the Commission
takes such action, the Commission shall
institute proceedings to determine
whether the proposed rule should be
approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File No. SR–
MIAX–2021–38 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 No.
SR–MIAX–2021–38. 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
18 15
19 17
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
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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 No.
SR–MIAX–2021–38, and should be
submitted on or before September 17,
2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2021–18461 Filed 8–26–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92729; File No. SR–CBOE–
2021–047]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating To Amend Rule
5.33
August 23, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on August
10, 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 proposal pursuant to
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe Exchange, Inc. (the ‘‘Exchange’’
or ‘‘Cboe Options’’) proposes to amend
Rule 5.33. The text of the proposed rule
change is provided in Exhibit 5.
20 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
1 15
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The text of the proposed rule change
is also available on the Exchange’s
website (https://www.cboe.com/
AboutCBOE/CBOELegal
RegulatoryHome.aspx), at the
Exchange’s Office of the Secretary, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
The Exchange proposes to amend
Rule 5.33 regarding complex orders.
Specifically, the proposed rule change
makes certain clarifying changes to add
detail to the Rule and nonsubstantive
changes, including to make certain
provisions plain English and to conform
certain language in the rule to that in
corresponding rules of its affiliated
options exchanges, Cboe EDGX
Exchange, Inc. (‘‘EDGX’’) Rule 21.20 and
Cboe C2 Exchange, Inc. (‘‘C2’’) Rule
5.33.
First, the Exchange proposes to make
the following clarifying or codifying
changes:
• The definition of ‘‘complex
strategy’’ in Rule 5.33(a) currently
provides that the Exchange may limit
the number of new complex strategies
that may be in the System at a particular
time. The proposed rule change codifies
that the Exchange may also limit the
number of new complex strategies that
may be entered for any EFID (which
EFID limit would be the same for all
users) at a particular time. This
proposed change is identical to the
definition of ‘‘complex strategy’’ in C2
Rule 5.33(a).5 Similar to the authority
for the Exchange to limit the number of
5 See
C2 Rule 5.33(a) (definition of complex
strategy, which permits the Exchange to limit the
number of new complex strategies that may be in
the System or entered for any EFID (which EFID
limit would be the same for all Users) at a particular
time).
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new complex strategies that may be in
the System, the proposed rule change
codifies another manner in which the
Exchange may limit complex strategies
in the System at a particular time. The
Exchange believes limiting complex
strategies per EFID will allow the
Exchange to manage System capacity in
a fair and reasonable manner by limiting
each EFID to the same number of
complex strategies they may have in the
System at one time.
• The proposed rule change specifies
in the definition of each of ‘‘synthetic
best bid or offer’’ (‘‘SBBO’’) and
‘‘synthetic national best bid or offer’’
(‘‘SNBBO’’) that each is comprised of
the best ‘‘net’’ bid and ‘‘net’’ offer (on
the Exchange or nationally,
respectively). The SBBO and SNBBO
each use the BBO or NBBO,
respectively, of each component to
determine the best synthetic bid or offer,
which is done by calculating the best
net bid or offer. The proposed rule
change merely clarifies that ‘‘netting’’
the BBOs or NBBOs, as applicable, is
how the SBBO or SNBBO, respectively,
is calculated. This proposed change is
identical to the definition of ‘‘SNBBO’’
in C2 Rule 5.33(a).6
• In Rule 5.33(b)(2), the proposed rule
change deletes the parenthetical after
the term ‘‘Capacities,’’ which
parenthetical states that Capacities
means, in other words, non-brokerdealer customers, broker-dealers that are
not maker-makers on an options
exchange, or market-makers on an
options exchange. The Rule does permit
the Exchange to determine which
Capacities are eligible for the complex
order auction (‘‘COA’’) or for entry into
the COB, but this parenthetical is not
consistent with the definition of
Capacities. Rule 1.1 defines ‘‘Capacity’’
as the capacity in which a user submits
an order, which the user specifies by
applying the corresponding code to the
order. The Capacity codes available are:
B (for the account of a broker or dealer),
C (for the account of a public customer),
F (for an OCC clearing member firm
proprietary account), J (for a joint back
office account), L (for the account of a
non-Trading Permit Holder (‘‘TPH’’)
affiliate), M (for the account of a MarketMaker), N (for the account of a marketmaker on another options exchange),
and U (for the account of a
professional). However, there is no
Capacity code for the three categories
listed in the parenthetical in Rule
5.33(b)(2), so the proposed rule change
6 See C2 Rule 5.33(a) (definition of SNBBO,
which states that the NBBO for each component of
a complex strategy establishes the best net bid and
offer for a complex strategy).
PO 00000
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deletes the inaccurate parenthetical to
maintain consistency throughout the
Rules. As noted above, the Exchange
does determine which Capacities are
eligible for COA or entry into the COB
(which the Exchange previously
announced to TPHs in accordance with
Rule 1.5 7), so the proposed rule change
has no impact on trading.
• The proposed rule change changes
the term ‘‘Queuing Period’’ to ‘‘order
entry period’’ in Rule 5.33(c)(1).
‘‘Queuing Period’’ is a defined term
used for the Opening Process for simple
orders set forth in Rule 5.31. The
Queuing Period, as defined, is the time
period prior to the initiation of an
opening rotation during which the
System accepts simple orders and
quotes in the book for participation in
the opening rotation for the applicable
trading session—in other words, the
order entry period. However, the COB
Opening Process described in Rule
5.33(c) differs from the Opening Process
for simple orders described in Rule
5.31—for example, there is no rotation
(i.e., auction)—and does not use the
same terminology. The proposed rule
change merely updates Rule 5.33(c)(1)
to use the appropriate terminology (as
used in the heading for that
subparagraph) for the COB Opening
Process.
• The proposed rule change amends
Rule 5.33(d)(3)(B) and (C) (which
describe certain circumstances that will
cause the Response Time Interval of a
COA to terminate early) to clarify that
subparagraph (B) applies to the receipt
of a non-Priority Customer Order in a
leg of the complex order that would
improve the SBBO on the same side as
the COA-eligible order that initiated the
COA. Subparagraph (C) explicitly
applies to the receipt of a Priority
Customer Order that would improve (or
join) the SBBO on the same side as the
COA-eligible order that initiated the
COA. Currently, subparagraph (B) only
references receipt of an order, but
receipt of a Priority Customer Order is
covered by subparagraph (C) and thus
the intent of subparagraph (B) was to
apply only to non-Priority Customer
Orders. Additionally, because a COA
will terminate early when the System
receives a non-Priority Customer Order
in a leg that would improve the SBBO
on the same side as the COA-eligible
order that initiated the COA, it would
only do so if the price was better than
7 Rule 1.5 states the Exchange announces to TPHs
all determinations it makes pursuant to the Rules
via specifications, notices, or regulatory circulars
with appropriate advanced notice, which are posted
on the Exchange’s website or as otherwise provided
in the Rules, among other manners of
announcement.
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the COA price, not equal to or better
than the COA price, so the proposed
rule change deletes ‘‘equal to or’’ prior
to better in subparagraph (B). This is
consistent with the definition of ‘‘COAeligible’’ order in Rule 5.33(b)(5), which
provides that a COA-eligible order may
initiate a COA if it has a price equal to
or better than the SBBO. In other words,
a COA-eligible order may execute at a
price equal to the SBBO (as long as there
is no Priority Customer Order on a leg
of the SBBO) and thus a COA should
not terminate if non-Priority Customer
Order is received at a price equal to the
COA-eligible order. However, if an order
is received during a COA that is better
than the COA price, it is appropriate to
terminate the COA because that COA
would not have been able to begin at the
COA price had that new order been on
the book at the time the COA-eligible
order was received by the System. This
is consistent with how the System
functions today and merely adds clarity
to the Rules. The proposed rule change
also adds to subparagraph (d)(3)(C) that
it applies when the System receives a
Priority Customer Order ‘‘in a leg of the
complex order,’’ which is consistent
with the language in subparagraph (B)
and implied by the fact it would join or
improve the SBBO (and thus it must
relate to a simple order in the book, as
simple orders in the book in the legs of
the complex order are used to calculate
the SBBO). The proposed rule change
also changes the phrase ‘‘COA in
progress’’ to ‘‘COA-eligible order that
initiated the COA’’ to conform to the
language in subparagraph (B).
• The proposed rule change adds
‘‘during the Response Time Interval’’ to
the end of the penultimate sentence of
the introductory paragraph of Rule
5.33(d)(4). This is consistent with the
definition of Response Time Interval,
which Rule 5.33(d)(3) defines as the
period of time during which users may
submit COA responses. This change
merely adds detail to the rule that is
consistent with the current rule and
conforms the language to corresponding
provisions in the C2 and EDGX Rules.8
• The proposed rule change clarifies
in Rule 5.33(d)(4)(B) that COA
Responses may be larger than the COAeligible order. This is identical to C2
Rule 5.33(d)(4)(B) and is implied by the
current provision, which states that the
System caps the size of aggregated COA
Responses at the EFID-level (which cap
would apply if an EFID submitted a
single COA Response larger than the
COA-eligible order). This merely
codifies current functionality in the
8 See C2 Rule 5.34(d)(4) and EDGX Rule
21.20(d)(4).
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Rules, which functionality is consistent
with the remainder of the rule
provision. Current Rule 5.33(d)(5)(B)
states that the System routes to PAR for
manual handling any COA-eligible
order (or unexecuted portion) that does
not execute at the end of the COA if not
eligible for entry in the COB or in
accordance with the User’s instructions.
The proposed rule change amends this
provision to provide that the System (i)
routes to PAR for manual handling or
(ii) cancels or rejects any COA-eligible
order (or unexecuted portion) that does
not execute at the end of the COA if not
eligible for entry into the COB, subject
to the user’s instructions. Similarly,
current Rule 5.33(e) states that the
System routes to PAR for manual
handling any complex order (or
unexecuted portion) that does not
execute upon entry and is not eligible
for entry into the COB, subject to the
User’s instructions. The proposed rule
change amends this provision to
provide that the System (i) routes to
PAR for manual handling or (ii) cancels
or rejects any complex order (or
unexecuted portion) that does not
execute upon entry and is not eligible
for entry into the COB, subject to the
user’s instructions. The addition of the
language to each of these provisions that
the System may cancel or reject such
COA-eligible order or do-not-COA
order, respectively (or unexecuted
portion), is consistent with the end of
each provision that states how the
System handles an order is subject to a
user’s instructions and the definitions of
such instructions. While orders on the
Exchange are primarily ‘‘Default’’
orders, which are orders designated for
electronic processing and are routed to
PAR for manual handling if not eligible
for electronic processing, users may also
designate orders as ‘‘Electronic Only,’’
which are orders designated for
electronic processing but do not route to
PAR for manual handling if not eligible
for electronic processing (and thus
would be cancelled if not executed
electronically).9 Therefore, if a COAeligible or do-not-COA order, as
applicable, was designated as Electronic
Only, the System would cancel that
order (or unexecuted portion) if it did
not execute at the end of the COA or
upon entry, respectively, and was not
eligible for COB entry, as instructed by
the user. The proposed rule change
merely adds this clarifying detail to the
Rule, which is consistent with the Rules
and current System functionality.
• The proposed rule change clarifies
in Rule 5.33(f)(2)(A)(v) that the System
does not execute a complex order at a
9 See
PO 00000
Rule 5.6(c).
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48265
net price that would cause any
component of the complex strategy to be
executed at a price ahead of a priority
customer order resting in the Simple
Book without improving the BBO of at
least one component of the complex
strategy ‘‘by at least one minimum
increment.’’ This is merely a
clarification, as trades may only occur
in the permissible minimum increment,
so improvement of one component of
the complex strategy would have to be
by at least one minimum increment.
This is consistent with language in C2
Rule 5.33(f)(2)(A)(v).10
• The proposed rule change clarifies
in Rule 5.33(i) that the System evaluates
incoming complex orders upon receipt
‘‘after the open of trading’’ to determine
whether it is a COA-eligible order or a
do-not-COA order (and thus how to
process it). This is merely a clarification
and consistent with the System, as prior
to the opening, there is no need to
conduct such evaluation since orders
entered during the complex order entry
period prior to the open rest in the COB
until the COB opening process, during
which all complex orders received
during the order entry period are
eligible to be matched.11 This is merely
clarifying language that is consistent
with current System functionality and
C2 Rule 5.33(i).
• The proposed rule change amends
Rule 5.33(k)(1) to clarify that when
trading in a complex strategy is
suspended, the System queues a user’s
complex orders ‘‘during a halt for
participation in the COB Opening
process’’ as set forth in Rule 5.33(k)(3).12
This language is consistent with the
language in Rule 5.33(k)(3) and identical
to C2 Rule 5.33(k)(1). The proposed rule
change also clarifies in subparagraph
(k)(1) that the COB remains available for
users to enter and manage complex
orders ‘‘that are not cancelled,’’ which
is consistent with the prior sentence,
pursuant to which users may cancel
complex orders upon a trading halt.
This language is also identical to C2
Rule 5.33(k)(1). These proposed rule
changes are not substantive but rather
make clarifications to subparagraph
(k)(1) that are consistent with current
10 C2 Rule 5.33(f)(2)(A)(v) provides that
improvement of one component must be by at least
$0.01, which is the minimum increment for all
complex orders on C2. The proposed rule change
uses the term ‘‘minimum increment’’ as Rule 5.4(b)
permits the Exchange to designate the minimum
increment for complex orders by class, and thus the
minimum increment may not be $0.01 on the
Exchange.
11 See Rule 5.33(c).
12 The proposed rule change also adds a period
after ‘‘suspended’’ to prevent the amended sentence
from being too long.
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System functionality and the remainder
of paragraph (k).
Second, the Exchange proposes to
make the following other
nonsubstantive changes:
• Currently, Rule 5.33(a) states the
term ‘‘complex order’’ has the meaning
set forth in Rule 1.1. The proposed rule
change amends this definition to state
that the term ‘‘complex order’’ is
defined in Rule 1.1 to make the
provision plain English and to conform
the language to that in other definitions
in the Exchange’s rulebook.
• Currently, Rule 5.33(a) defines the
complex order book (‘‘COB’’) as the
Exchange’s electronic book of complex
orders maintained by the System, which
single book is used during both the
Regular Trading Hours (‘‘RTH’’) and
Global Trading Hours (‘‘GTH’’) trading
sessions. The proposed rule change
defines COB as the Exchange’s
electronic book of complex orders used
for all trading sessions. The Exchange
believes this proposed change
streamlines the definition and
eliminates unnecessary terminology.13
• The proposed rule change amends
the definitions of ‘‘All Sessions,’’ ‘‘MTP
Modifiers,’’ and ‘‘RTH Only’’ in Rule
5.33(b)(5) and applicable provisions in
Rule 5.33(d)(2)(A), (3), (3)(B), and (3)(C),
(5), (5)(A)(i) and (ii), and (5)(B), (e),
(e)(1) and (2), (f)(2)(A)(v) and (2)(B), (g),
(i) and (i)(3)(C), (j)(3), and (k)(2) to state
that orders ‘‘rest in’’ or are otherwise
‘‘in’’ the simple book or COB rather than
‘‘on’’ the simple book or COB. The
majority of the provisions in Rule 5.33
state that orders are ‘‘in’’ the book or
COB, so the Exchange proposes to
amend these provisions to maintain
consistency throughout Rule 5.33.
• The proposed rule change amends
the definitions of ‘‘Book Only’’ and
‘‘Post Only’’ in Rule 5.33(b)(5) to state
that the order is ‘‘subject to a user’s
instructions’’ rather than ‘‘in accordance
with the user’s instructions.’’ The
phrases mean the same thing in the
context of these rule provisions, but the
majority of Rule 5.33 uses the phrase
‘‘subject to a user’s instructions,’’ so the
Exchange proposes to amend these
provisions to maintain consistency
throughout Rule 5.33.
• The proposed rule change proposes
to delete the term ‘‘complex order’’ prior
to ‘‘Capacities’’ in the definition of
13 The phrase ‘‘all trading sessions’’ would
incorporate both RTH and GTH—currently the only
two trading sessions on the Exchange—so it is
unnecessary to list both of those in the definition.
See Rule 1.1 (definition of ‘‘trading session’’).
Additionally, the definition implies that the COB is
maintained by the Exchange’s trading system and
is a single book because it is an ‘‘electronic book,’’
making the language proposed to be deleted
unnecessary.
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‘‘Complex Only’’ in Rule 5.33(a). Rule
5.33 relates solely to the trading of
complex orders and generally does not
specify that certain terms relate to
complex orders (for example, just prior
to Capacities, the term ‘‘Times-in-Force’’
is not qualified to be complex order
‘‘Times-in-Force’’). Therefore, the
proposed rule change deletes ‘‘complex
order’’ prior to ‘‘Capacities,’’ as it is
redundant and unnecessary.
• The proposed rule change amends
Rule 5.33(d)(2)(A) to use the term
‘‘subparagraph’’ rather than ‘‘paragraph’’
for the cross-reference to subparagraph
(d)(3) in that provision. This merely
conforms to terminology used
throughout the Rules.
• The proposed rule change amends
Rule 5.33(d)(3)(A) through (C) and (j)(3)
to replace ‘‘posts’’ with ‘‘enters’’ when
describing an order entering into the
COB or the Book. This merely changes
the term used to describe an order
entering a book to conform to the
terminology used elsewhere in the
Rules.
• The proposed rule change deletes
an inadvertent grammatically incorrect
comma after ‘‘EFID’’ in Rule
5.33(d)(4)(B), after ‘‘class in Rule
5.33(d)(5)(A)(ii), after the second
parenthetical in Rule 5.33(d)(5)(B), and
after the second parenthetical in the last
paragraph of Rule 5.33(e).
• The proposed rule change deletes
inadvertent extra spaces prior to the
hyphen in the term ‘‘contra-side’’ in
Rule 5.33(d)(5)(A) and (e).
• The proposed rule change replaces
‘‘pursuant to’’ with ‘‘which the System
allocates in accordance with’’ in Rule
5.33(d)(5)(A)(ii) and (e)(2). The
provision has the same meaning, but the
new language is consistent with
language used in the remainder of Rule
5.33. The proposed rule change also
adds ‘‘as’’ prior to ‘‘determined’’ at the
end of Rule 5.33(d)(A)(ii) to similarly be
consistent with language used in the
remainder of Rule 5.33.
• The proposed rule change replaces
‘‘if eligible to rest’’ with ‘‘if eligible for
entry’’ in Rule 5.33(d)(5)(B), the last
paragraph of Rule 5.33(e), and (k)(1) and
(2). This is consistent with the language
in Rule 5.33(b)(2) regarding the
Exchange’s authority to determine
which Capacities are eligible for entry
into the Book.
• The proposed rule change amends
the heading of Rule 5.33(g) to be
‘‘Legging’’ rather than ‘‘Legging
Restrictions,’’ as the Exchange believes
it to be more appropriate given that
paragraph (g) describes how a complex
order may leg into the simple book, in
addition to certain restrictions that
apply to legging.
PO 00000
Frm 00153
Fmt 4703
Sfmt 4703
• The proposed rule change adds
subheading names to subparagraphs
(h)(1) through (3) to be consistent with
the remainder of Rule 5.33, as
subparagraphs in the rule generally have
subheadings. The proposed rule change
also moves current subparagraph (2) to
proposed subparagraph (3) 14 and
renumbers current subparagraph (3) as
subparagraph (2).
• The proposed rule change amends
the last to sentences of Rule 5.33(k)(1)
to eliminate the passive voice in each
sentence, thus making each sentence
more plain English.
The proposed rule change adds a
heading to Interpretation and Policy .03
to be consistent with the other
Interpretations and Policies in Rule
5.33.
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.15 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 16 requirements that the rules of
an exchange be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest.
Additionally, the Exchange believes the
proposed rule change is consistent with
the Section 6(b)(5) 17 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 will protect
investors and the public interest by
adding clarifications and detail to the
Rules, as well as conforming and
simplifying certain rule provisions. The
proposed clarifying and nonsubstantive
rule changes will have no impact on
trading, as they codify or are otherwise
consistent with current functionality
14 The proposed rule change makes a
nonsubstantive change to proposed subparagraph
(3) (current subparagraph (2) to move the word
‘‘resting’’ after the term ‘‘complex order’’ rather
than before.
15 15 U.S.C. 78f(b).
16 15 U.S.C. 78f(b)(5).
17 Id.
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27AUN1
Federal Register / Vol. 86, No. 164 / Friday, August 27, 2021 / Notices
and rules. The Exchange also believes
that the proposed rule change will
remove impediments to and perfect the
mechanism of a free and open market
and a national market system, as several
proposed changes are based on
corresponding complex order rules of
Cboe Options’ affiliated exchanges, C2
and EDGX (as described above). The
Exchange believes greater
harmonization of Rules of affiliated
exchanges that describe the same
functionality will simplify the rulebook
for users of the Exchange that are also
participants on Cboe affiliated
exchanges, thus benefiting investors.
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
proposed rule change will not burden
intramarket competition because it will
apply in the same manner to all TPHs
that submit complex orders to the
Exchange. The proposed rule change
will not burden intermarket competition
because it is not intended to be a
competitive filing but is rather intended
to add clarity and detail to the Rules, as
well as harmonize the Exchange’s rules
regarding complex orders with those of
its affiliated exchanges, C2 and EDGX.
The proposed rule changes, as described
above, are consistent with current rules
and functionality and will have no
impact on trading on the Exchange.
lotter on DSK11XQN23PROD with NOTICES1
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 18 and Rule
19b–4(f)(6) thereunder.19 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
18 15
U.S.C. 78s(b)(3)(A)(iii).
19 17 CFR 240.19b–4(f)(6).
VerDate Sep<11>2014
17:52 Aug 26, 2021
Jkt 253001
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 20 and Rule 19b–4(f)(6)(iii)
thereunder.21
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. As discussed above, Cboe states
that the proposal makes non-substantive
changes that clarifying Cboe’s rules or
harmonize Cboe’s rules with those of its
affiliated exchanges. The Commission
believes that waiver of the 30-day
operative delay is consistent with the
protection of investors and the public
interest because the proposed changes
do not raise novel issues and are
designed to clarify the Exchange’s rules
and enhance their internal consistency,
correct inaccurate terminology, and
conform the Exchange’s rules to the
rules of its affiliated exchanges.
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 this 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 will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
20 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires the Exchange to give the
Commission written notice of the Exchange’s intent
to file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
22 17 CFR 240.19b–4(f)(6).
23 17 CFR 240.19b–4(f)(6)(iii).
24 For purposed 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).
21 17
PO 00000
Frm 00154
Fmt 4703
Sfmt 9990
48267
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CBOE–2021–047 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–2021–047. 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–CBOE–2021–047, and
should be submitted on or before
September 17, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2021–18464 Filed 8–26–21; 8:45 am]
BILLING CODE 8011–01–P
25 17
E:\FR\FM\27AUN1.SGM
CFR 200.30–3(a)(12).
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]]>Agencies
[Federal Register Volume 86, Number 164 (Friday, August 27, 2021)]
[Notices]
[Pages 48263-48267]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-18464]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92729; File No. SR-CBOE-2021-047]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Relating
To Amend Rule 5.33
August 23, 2021.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on August 10, 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 proposal pursuant to Section 19(b)(3)(A)(iii) of the Act \3\
and Rule 19b-4(f)(6) thereunder.\4\ The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to amend Rule 5.33. The text of the proposed rule change is provided in
Exhibit 5.
[[Page 48264]]
The text of the proposed rule change is also available on the
Exchange's website (https://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 5.33 regarding complex orders.
Specifically, the proposed rule change makes certain clarifying changes
to add detail to the Rule and nonsubstantive changes, including to make
certain provisions plain English and to conform certain language in the
rule to that in corresponding rules of its affiliated options
exchanges, Cboe EDGX Exchange, Inc. (``EDGX'') Rule 21.20 and Cboe C2
Exchange, Inc. (``C2'') Rule 5.33.
First, the Exchange proposes to make the following clarifying or
codifying changes:
The definition of ``complex strategy'' in Rule 5.33(a)
currently provides that the Exchange may limit the number of new
complex strategies that may be in the System at a particular time. The
proposed rule change codifies that the Exchange may also limit the
number of new complex strategies that may be entered for any EFID
(which EFID limit would be the same for all users) at a particular
time. This proposed change is identical to the definition of ``complex
strategy'' in C2 Rule 5.33(a).\5\ Similar to the authority for the
Exchange to limit the number of new complex strategies that may be in
the System, the proposed rule change codifies another manner in which
the Exchange may limit complex strategies in the System at a particular
time. The Exchange believes limiting complex strategies per EFID will
allow the Exchange to manage System capacity in a fair and reasonable
manner by limiting each EFID to the same number of complex strategies
they may have in the System at one time.
---------------------------------------------------------------------------
\5\ See C2 Rule 5.33(a) (definition of complex strategy, which
permits the Exchange to limit the number of new complex strategies
that may be in the System or entered for any EFID (which EFID limit
would be the same for all Users) at a particular time).
---------------------------------------------------------------------------
The proposed rule change specifies in the definition of
each of ``synthetic best bid or offer'' (``SBBO'') and ``synthetic
national best bid or offer'' (``SNBBO'') that each is comprised of the
best ``net'' bid and ``net'' offer (on the Exchange or nationally,
respectively). The SBBO and SNBBO each use the BBO or NBBO,
respectively, of each component to determine the best synthetic bid or
offer, which is done by calculating the best net bid or offer. The
proposed rule change merely clarifies that ``netting'' the BBOs or
NBBOs, as applicable, is how the SBBO or SNBBO, respectively, is
calculated. This proposed change is identical to the definition of
``SNBBO'' in C2 Rule 5.33(a).\6\
---------------------------------------------------------------------------
\6\ See C2 Rule 5.33(a) (definition of SNBBO, which states that
the NBBO for each component of a complex strategy establishes the
best net bid and offer for a complex strategy).
---------------------------------------------------------------------------
In Rule 5.33(b)(2), the proposed rule change deletes the
parenthetical after the term ``Capacities,'' which parenthetical states
that Capacities means, in other words, non-broker-dealer customers,
broker-dealers that are not maker-makers on an options exchange, or
market-makers on an options exchange. The Rule does permit the Exchange
to determine which Capacities are eligible for the complex order
auction (``COA'') or for entry into the COB, but this parenthetical is
not consistent with the definition of Capacities. Rule 1.1 defines
``Capacity'' as the capacity in which a user submits an order, which
the user specifies by applying the corresponding code to the order. The
Capacity codes available are: B (for the account of a broker or
dealer), C (for the account of a public customer), F (for an OCC
clearing member firm proprietary account), J (for a joint back office
account), L (for the account of a non-Trading Permit Holder (``TPH'')
affiliate), M (for the account of a Market-Maker), N (for the account
of a market-maker on another options exchange), and U (for the account
of a professional). However, there is no Capacity code for the three
categories listed in the parenthetical in Rule 5.33(b)(2), so the
proposed rule change deletes the inaccurate parenthetical to maintain
consistency throughout the Rules. As noted above, the Exchange does
determine which Capacities are eligible for COA or entry into the COB
(which the Exchange previously announced to TPHs in accordance with
Rule 1.5 \7\), so the proposed rule change has no impact on trading.
---------------------------------------------------------------------------
\7\ Rule 1.5 states the Exchange announces to TPHs all
determinations it makes pursuant to the Rules via specifications,
notices, or regulatory circulars with appropriate advanced notice,
which are posted on the Exchange's website or as otherwise provided
in the Rules, among other manners of announcement.
---------------------------------------------------------------------------
The proposed rule change changes the term ``Queuing
Period'' to ``order entry period'' in Rule 5.33(c)(1). ``Queuing
Period'' is a defined term used for the Opening Process for simple
orders set forth in Rule 5.31. The Queuing Period, as defined, is the
time period prior to the initiation of an opening rotation during which
the System accepts simple orders and quotes in the book for
participation in the opening rotation for the applicable trading
session--in other words, the order entry period. However, the COB
Opening Process described in Rule 5.33(c) differs from the Opening
Process for simple orders described in Rule 5.31--for example, there is
no rotation (i.e., auction)--and does not use the same terminology. The
proposed rule change merely updates Rule 5.33(c)(1) to use the
appropriate terminology (as used in the heading for that subparagraph)
for the COB Opening Process.
The proposed rule change amends Rule 5.33(d)(3)(B) and (C)
(which describe certain circumstances that will cause the Response Time
Interval of a COA to terminate early) to clarify that subparagraph (B)
applies to the receipt of a non-Priority Customer Order in a leg of the
complex order that would improve the SBBO on the same side as the COA-
eligible order that initiated the COA. Subparagraph (C) explicitly
applies to the receipt of a Priority Customer Order that would improve
(or join) the SBBO on the same side as the COA-eligible order that
initiated the COA. Currently, subparagraph (B) only references receipt
of an order, but receipt of a Priority Customer Order is covered by
subparagraph (C) and thus the intent of subparagraph (B) was to apply
only to non-Priority Customer Orders. Additionally, because a COA will
terminate early when the System receives a non-Priority Customer Order
in a leg that would improve the SBBO on the same side as the COA-
eligible order that initiated the COA, it would only do so if the price
was better than
[[Page 48265]]
the COA price, not equal to or better than the COA price, so the
proposed rule change deletes ``equal to or'' prior to better in
subparagraph (B). This is consistent with the definition of ``COA-
eligible'' order in Rule 5.33(b)(5), which provides that a COA-eligible
order may initiate a COA if it has a price equal to or better than the
SBBO. In other words, a COA-eligible order may execute at a price equal
to the SBBO (as long as there is no Priority Customer Order on a leg of
the SBBO) and thus a COA should not terminate if non-Priority Customer
Order is received at a price equal to the COA-eligible order. However,
if an order is received during a COA that is better than the COA price,
it is appropriate to terminate the COA because that COA would not have
been able to begin at the COA price had that new order been on the book
at the time the COA-eligible order was received by the System. This is
consistent with how the System functions today and merely adds clarity
to the Rules. The proposed rule change also adds to subparagraph
(d)(3)(C) that it applies when the System receives a Priority Customer
Order ``in a leg of the complex order,'' which is consistent with the
language in subparagraph (B) and implied by the fact it would join or
improve the SBBO (and thus it must relate to a simple order in the
book, as simple orders in the book in the legs of the complex order are
used to calculate the SBBO). The proposed rule change also changes the
phrase ``COA in progress'' to ``COA-eligible order that initiated the
COA'' to conform to the language in subparagraph (B).
The proposed rule change adds ``during the Response Time
Interval'' to the end of the penultimate sentence of the introductory
paragraph of Rule 5.33(d)(4). This is consistent with the definition of
Response Time Interval, which Rule 5.33(d)(3) defines as the period of
time during which users may submit COA responses. This change merely
adds detail to the rule that is consistent with the current rule and
conforms the language to corresponding provisions in the C2 and EDGX
Rules.\8\
---------------------------------------------------------------------------
\8\ See C2 Rule 5.34(d)(4) and EDGX Rule 21.20(d)(4).
---------------------------------------------------------------------------
The proposed rule change clarifies in Rule 5.33(d)(4)(B)
that COA Responses may be larger than the COA-eligible order. This is
identical to C2 Rule 5.33(d)(4)(B) and is implied by the current
provision, which states that the System caps the size of aggregated COA
Responses at the EFID-level (which cap would apply if an EFID submitted
a single COA Response larger than the COA-eligible order). This merely
codifies current functionality in the Rules, which functionality is
consistent with the remainder of the rule provision. Current Rule
5.33(d)(5)(B) states that the System routes to PAR for manual handling
any COA-eligible order (or unexecuted portion) that does not execute at
the end of the COA if not eligible for entry in the COB or in
accordance with the User's instructions. The proposed rule change
amends this provision to provide that the System (i) routes to PAR for
manual handling or (ii) cancels or rejects any COA-eligible order (or
unexecuted portion) that does not execute at the end of the COA if not
eligible for entry into the COB, subject to the user's instructions.
Similarly, current Rule 5.33(e) states that the System routes to PAR
for manual handling any complex order (or unexecuted portion) that does
not execute upon entry and is not eligible for entry into the COB,
subject to the User's instructions. The proposed rule change amends
this provision to provide that the System (i) routes to PAR for manual
handling or (ii) cancels or rejects any complex order (or unexecuted
portion) that does not execute upon entry and is not eligible for entry
into the COB, subject to the user's instructions. The addition of the
language to each of these provisions that the System may cancel or
reject such COA-eligible order or do-not-COA order, respectively (or
unexecuted portion), is consistent with the end of each provision that
states how the System handles an order is subject to a user's
instructions and the definitions of such instructions. While orders on
the Exchange are primarily ``Default'' orders, which are orders
designated for electronic processing and are routed to PAR for manual
handling if not eligible for electronic processing, users may also
designate orders as ``Electronic Only,'' which are orders designated
for electronic processing but do not route to PAR for manual handling
if not eligible for electronic processing (and thus would be cancelled
if not executed electronically).\9\ Therefore, if a COA-eligible or do-
not-COA order, as applicable, was designated as Electronic Only, the
System would cancel that order (or unexecuted portion) if it did not
execute at the end of the COA or upon entry, respectively, and was not
eligible for COB entry, as instructed by the user. The proposed rule
change merely adds this clarifying detail to the Rule, which is
consistent with the Rules and current System functionality.
---------------------------------------------------------------------------
\9\ See Rule 5.6(c).
---------------------------------------------------------------------------
The proposed rule change clarifies in Rule
5.33(f)(2)(A)(v) that the System does not execute a complex order at a
net price that would cause any component of the complex strategy to be
executed at a price ahead of a priority customer order resting in the
Simple Book without improving the BBO of at least one component of the
complex strategy ``by at least one minimum increment.'' This is merely
a clarification, as trades may only occur in the permissible minimum
increment, so improvement of one component of the complex strategy
would have to be by at least one minimum increment. This is consistent
with language in C2 Rule 5.33(f)(2)(A)(v).\10\
---------------------------------------------------------------------------
\10\ C2 Rule 5.33(f)(2)(A)(v) provides that improvement of one
component must be by at least $0.01, which is the minimum increment
for all complex orders on C2. The proposed rule change uses the term
``minimum increment'' as Rule 5.4(b) permits the Exchange to
designate the minimum increment for complex orders by class, and
thus the minimum increment may not be $0.01 on the Exchange.
---------------------------------------------------------------------------
The proposed rule change clarifies in Rule 5.33(i) that
the System evaluates incoming complex orders upon receipt ``after the
open of trading'' to determine whether it is a COA-eligible order or a
do-not-COA order (and thus how to process it). This is merely a
clarification and consistent with the System, as prior to the opening,
there is no need to conduct such evaluation since orders entered during
the complex order entry period prior to the open rest in the COB until
the COB opening process, during which all complex orders received
during the order entry period are eligible to be matched.\11\ This is
merely clarifying language that is consistent with current System
functionality and C2 Rule 5.33(i).
---------------------------------------------------------------------------
\11\ See Rule 5.33(c).
---------------------------------------------------------------------------
The proposed rule change amends Rule 5.33(k)(1) to clarify
that when trading in a complex strategy is suspended, the System queues
a user's complex orders ``during a halt for participation in the COB
Opening process'' as set forth in Rule 5.33(k)(3).\12\ This language is
consistent with the language in Rule 5.33(k)(3) and identical to C2
Rule 5.33(k)(1). The proposed rule change also clarifies in
subparagraph (k)(1) that the COB remains available for users to enter
and manage complex orders ``that are not cancelled,'' which is
consistent with the prior sentence, pursuant to which users may cancel
complex orders upon a trading halt. This language is also identical to
C2 Rule 5.33(k)(1). These proposed rule changes are not substantive but
rather make clarifications to subparagraph (k)(1) that are consistent
with current
[[Page 48266]]
System functionality and the remainder of paragraph (k).
---------------------------------------------------------------------------
\12\ The proposed rule change also adds a period after
``suspended'' to prevent the amended sentence from being too long.
---------------------------------------------------------------------------
Second, the Exchange proposes to make the following other
nonsubstantive changes:
Currently, Rule 5.33(a) states the term ``complex order''
has the meaning set forth in Rule 1.1. The proposed rule change amends
this definition to state that the term ``complex order'' is defined in
Rule 1.1 to make the provision plain English and to conform the
language to that in other definitions in the Exchange's rulebook.
Currently, Rule 5.33(a) defines the complex order book
(``COB'') as the Exchange's electronic book of complex orders
maintained by the System, which single book is used during both the
Regular Trading Hours (``RTH'') and Global Trading Hours (``GTH'')
trading sessions. The proposed rule change defines COB as the
Exchange's electronic book of complex orders used for all trading
sessions. The Exchange believes this proposed change streamlines the
definition and eliminates unnecessary terminology.\13\
---------------------------------------------------------------------------
\13\ The phrase ``all trading sessions'' would incorporate both
RTH and GTH--currently the only two trading sessions on the
Exchange--so it is unnecessary to list both of those in the
definition. See Rule 1.1 (definition of ``trading session'').
Additionally, the definition implies that the COB is maintained by
the Exchange's trading system and is a single book because it is an
``electronic book,'' making the language proposed to be deleted
unnecessary.
---------------------------------------------------------------------------
The proposed rule change amends the definitions of ``All
Sessions,'' ``MTP Modifiers,'' and ``RTH Only'' in Rule 5.33(b)(5) and
applicable provisions in Rule 5.33(d)(2)(A), (3), (3)(B), and (3)(C),
(5), (5)(A)(i) and (ii), and (5)(B), (e), (e)(1) and (2), (f)(2)(A)(v)
and (2)(B), (g), (i) and (i)(3)(C), (j)(3), and (k)(2) to state that
orders ``rest in'' or are otherwise ``in'' the simple book or COB
rather than ``on'' the simple book or COB. The majority of the
provisions in Rule 5.33 state that orders are ``in'' the book or COB,
so the Exchange proposes to amend these provisions to maintain
consistency throughout Rule 5.33.
The proposed rule change amends the definitions of ``Book
Only'' and ``Post Only'' in Rule 5.33(b)(5) to state that the order is
``subject to a user's instructions'' rather than ``in accordance with
the user's instructions.'' The phrases mean the same thing in the
context of these rule provisions, but the majority of Rule 5.33 uses
the phrase ``subject to a user's instructions,'' so the Exchange
proposes to amend these provisions to maintain consistency throughout
Rule 5.33.
The proposed rule change proposes to delete the term
``complex order'' prior to ``Capacities'' in the definition of
``Complex Only'' in Rule 5.33(a). Rule 5.33 relates solely to the
trading of complex orders and generally does not specify that certain
terms relate to complex orders (for example, just prior to Capacities,
the term ``Times-in-Force'' is not qualified to be complex order
``Times-in-Force''). Therefore, the proposed rule change deletes
``complex order'' prior to ``Capacities,'' as it is redundant and
unnecessary.
The proposed rule change amends Rule 5.33(d)(2)(A) to use
the term ``subparagraph'' rather than ``paragraph'' for the cross-
reference to subparagraph (d)(3) in that provision. This merely
conforms to terminology used throughout the Rules.
The proposed rule change amends Rule 5.33(d)(3)(A) through
(C) and (j)(3) to replace ``posts'' with ``enters'' when describing an
order entering into the COB or the Book. This merely changes the term
used to describe an order entering a book to conform to the terminology
used elsewhere in the Rules.
The proposed rule change deletes an inadvertent
grammatically incorrect comma after ``EFID'' in Rule 5.33(d)(4)(B),
after ``class in Rule 5.33(d)(5)(A)(ii), after the second parenthetical
in Rule 5.33(d)(5)(B), and after the second parenthetical in the last
paragraph of Rule 5.33(e).
The proposed rule change deletes inadvertent extra spaces
prior to the hyphen in the term ``contra-side'' in Rule 5.33(d)(5)(A)
and (e).
The proposed rule change replaces ``pursuant to'' with
``which the System allocates in accordance with'' in Rule
5.33(d)(5)(A)(ii) and (e)(2). The provision has the same meaning, but
the new language is consistent with language used in the remainder of
Rule 5.33. The proposed rule change also adds ``as'' prior to
``determined'' at the end of Rule 5.33(d)(A)(ii) to similarly be
consistent with language used in the remainder of Rule 5.33.
The proposed rule change replaces ``if eligible to rest''
with ``if eligible for entry'' in Rule 5.33(d)(5)(B), the last
paragraph of Rule 5.33(e), and (k)(1) and (2). This is consistent with
the language in Rule 5.33(b)(2) regarding the Exchange's authority to
determine which Capacities are eligible for entry into the Book.
The proposed rule change amends the heading of Rule
5.33(g) to be ``Legging'' rather than ``Legging Restrictions,'' as the
Exchange believes it to be more appropriate given that paragraph (g)
describes how a complex order may leg into the simple book, in addition
to certain restrictions that apply to legging.
The proposed rule change adds subheading names to
subparagraphs (h)(1) through (3) to be consistent with the remainder of
Rule 5.33, as subparagraphs in the rule generally have subheadings. The
proposed rule change also moves current subparagraph (2) to proposed
subparagraph (3) \14\ and renumbers current subparagraph (3) as
subparagraph (2).
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\14\ The proposed rule change makes a nonsubstantive change to
proposed subparagraph (3) (current subparagraph (2) to move the word
``resting'' after the term ``complex order'' rather than before.
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The proposed rule change amends the last to sentences of
Rule 5.33(k)(1) to eliminate the passive voice in each sentence, thus
making each sentence more plain English.
The proposed rule change adds a heading to Interpretation and
Policy .03 to be consistent with the other Interpretations and Policies
in Rule 5.33.
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.\15\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \16\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \17\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(5).
\17\ Id.
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In particular, the Exchange believes the proposed rule change will
protect investors and the public interest by adding clarifications and
detail to the Rules, as well as conforming and simplifying certain rule
provisions. The proposed clarifying and nonsubstantive rule changes
will have no impact on trading, as they codify or are otherwise
consistent with current functionality
[[Page 48267]]
and rules. The Exchange also believes that the proposed rule change
will remove impediments to and perfect the mechanism of a free and open
market and a national market system, as several proposed changes are
based on corresponding complex order rules of Cboe Options' affiliated
exchanges, C2 and EDGX (as described above). The Exchange believes
greater harmonization of Rules of affiliated exchanges that describe
the same functionality will simplify the rulebook for users of the
Exchange that are also participants on Cboe affiliated exchanges, thus
benefiting investors.
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 proposed rule change
will not burden intramarket competition because it will apply in the
same manner to all TPHs that submit complex orders to the Exchange. The
proposed rule change will not burden intermarket competition because it
is not intended to be a competitive filing but is rather intended to
add clarity and detail to the Rules, as well as harmonize the
Exchange's rules regarding complex orders with those of its affiliated
exchanges, C2 and EDGX. The proposed rule changes, as described above,
are consistent with current rules and functionality and will have no
impact on trading on the Exchange.
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 \18\ and Rule 19b-4(f)(6) thereunder.\19\
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 \20\ and Rule 19b-
4(f)(6)(iii) thereunder.\21\
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\18\ 15 U.S.C. 78s(b)(3)(A)(iii).
\19\ 17 CFR 240.19b-4(f)(6).
\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change, along with a
brief description and text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \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. As discussed above, Cboe
states that the proposal makes non-substantive changes that clarifying
Cboe's rules or harmonize Cboe's rules with those of its affiliated
exchanges. The Commission believes that waiver of the 30-day operative
delay is consistent with the protection of investors and the public
interest because the proposed changes do not raise novel issues and are
designed to clarify the Exchange's rules and enhance their internal
consistency, correct inaccurate terminology, and conform the Exchange's
rules to the rules of its affiliated exchanges. Accordingly, the
Commission hereby waives the 30-day operative delay and designates the
proposal operative upon filing.\24\
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\22\ 17 CFR 240.19b-4(f)(6).
\23\ 17 CFR 240.19b-4(f)(6)(iii).
\24\ For purposed only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of this 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 will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CBOE-2021-047 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-2021-047. 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-CBOE-2021-047, and should be submitted
on or before September 17, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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\25\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2021-18464 Filed 8-26-21; 8:45 am]
BILLING CODE 8011-01-P
