Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Amend the Opening Auction Process Provided Under Rule 11.23(b)(2)(B), 73367-73370 [2022-26051]

Download as PDF Federal Register / Vol. 87, No. 228 / Tuesday, November 29, 2022 / Notices Proposed Amendment or to approve the Proposed Amendment with any changes or subject to any conditions the Commission deems necessary or appropriate (File No. 4–698). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.12 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2022–26045 Filed 11–28–22; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 34758; File No. 812–15358] Cantor Fitzgerald Sustainable Infrastructure Fund and Cantor Fitzgerald Investment Advisors, L.P. November 22, 2022. Securities and Exchange Commission (‘‘Commission’’ or ‘‘SEC’’). ACTION: Notice. khammond on DSKJM1Z7X2PROD with NOTICES AGENCY: Notice of an application for an order pursuant to section 6(c) of the Investment Company Act of 1940 (the ‘‘Act’’) for an exemption from sections 18(a)(2), 18(c), and 18(i) of the Act, pursuant to sections 6(c) and 23(c) of the Act for certain exemptions from rule 23c–3 under the Act, and pursuant to section 17(d) of the Act and rule 17d– 1 thereunder. SUMMARY OF APPLICATION: Applicants request an order to permit certain registered closed-end management investment companies to issue multiple classes of shares and to impose early withdrawal charges and asset-based distribution and/or service fees. APPLICANTS: Cantor Fitzgerald Sustainable Infrastructure Fund and Cantor Fitzgerald Investment Advisors, L.P. FILING DATES: The application was filed on June 27, 2022, and amended on October 6, 2022. HEARING OR NOTIFICATION OF HEARING: An order granting the requested relief will be issued unless the Commission orders a hearing. Interested persons may request a hearing on any application by emailing the SEC’s Secretary at Secretarys-Office@sec.gov and serving the Applicants with a copy of the request by email, if an email address is listed for the relevant Applicant below, or personally or by mail, if a physical address is listed for the relevant Applicant below. Hearing requests should be received by the Commission 12 17 CFR 200.30–3(a)(85). VerDate Sep<11>2014 16:29 Nov 28, 2022 Jkt 259001 by 5:30 p.m. on December 19, 2022, and should be accompanied by proof of service on applicants, in the form of an affidavit or, for lawyers, a certificate of service. Pursuant to rule 0–5 under the Act, hearing requests should state the nature of the writer’s interest, any facts bearing upon the desirability of a hearing on the matter, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by emailing the Commission’s Secretary at Secretarys-Office@sec.gov. ADDRESSES: The Commission: Secretarys-Office@sec.gov. Applicants: Terrence Davis, Esq., davist@gtlaw.com. FOR FURTHER INFORMATION CONTACT: Jennifer O. Palmer, Senior Counsel, or Terri G. Jordan, Branch Chief, at (202) 551–6825 (Division of Investment Management, Chief Counsel’s Office). SUPPLEMENTARY INFORMATION: For Applicants’ representations, legal analysis, and conditions, please refer to Applicants’ second amended and restated application, dated October 6, 2022, which may be obtained via the Commission’s website by searching for the file number at the top of this document, or for an Applicant using the Company name search field, on the SEC’s EDGAR system. The SEC’s EDGAR system may be searched at, at https://www.sec.gov/edgar/searchedgar/ legacy/companysearch.html. You may also call the SEC’s Public Reference Room at (202) 551–8090. For the Commission, by the Division of Investment Management, under delegated authority. Sherry R. Haywood, Assistant Secretary. [FR Doc. 2022–25956 Filed 11–28–22; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–96384; File No. SRCboeBZX–2022–045] Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Amend the Opening Auction Process Provided Under Rule 11.23(b)(2)(B) November 23, 2022. On August 15, 2022, Cboe BZX Exchange, Inc. (‘‘Exchange’’ or ‘‘BZX’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to section 19(b)(1) of the Securities PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 73367 Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to amend the Opening Auction process provided under Rule 11.23(b)(2)(B). The proposed rule change was published for comment in the Federal Register on August 31, 2022.3 On October 12, 2022, 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.5 The Commission has received no comments on the proposed rule change. This order institutes proceedings under section 19(b)(2)(B) of the Act 6 to determine whether to approve or disapprove the proposed rule change. I. Summary of the Proposed Rule Change 7 BZX holds an Opening Auction for each security listed on the Exchange. During an Opening Auction, all executions, if any, occur at a single price, and that price must be within a certain range established by the Exchange. The Exchange proposes to amend its Opening Auction process by, under certain circumstances, delaying the Opening Auction and if necessary gradually widening the bands within which the Opening Auction price must fall. The Exchange also proposes associated changes reflecting the proposed modifications to its process.8 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 95601 (Aug. 25, 2022), 87 FR 53514 (‘‘Notice’’). 4 15 U.S.C. 78s(b)(2). 5 See Securities Exchange Act Release No. 96038, 87 FR 63115 (Oct. 18, 2022). The Commission designated November 29, 2022 as the date by which the Commission shall approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change. 6 15 U.S.C. 78s(b)(2)(B). 7 For a full description of all aspects of the proposed rule change, including BZX’s justification for it, please see the Notice, supra note 3. 8 For example, the Exchnage proposes to amend BZX Rules 11.23(b)(1)(A) and (B), to reflect that the Opening Auction may occur at a time other than 9:30 a.m. It also proposes to amend BZX Rule 11.23(b)(1)(B) to provide that Eligible Auction Orders designated for the Opening Auction may not be cancelled or modified from 9:28 a.m. until the Opening Auction has concluded except that Regular Hours Only (‘‘RHO’’) limit orders designated for the Opening Auction may be modified, but not cancelled, from 9:28 a.m. until the time the Opening Auction has concluded. Any such RHO limit orders modified from 9:28 a.m. until the Opening Auction has concluded would be treated as late-limit-on-open orders. 2 17 E:\FR\FM\29NON1.SGM 29NON1 73368 Federal Register / Vol. 87, No. 228 / Tuesday, November 29, 2022 / Notices khammond on DSKJM1Z7X2PROD with NOTICES A. The Current Opening Auction Process Each Opening Auction price is the price level within the Collar Price Range 9 that maximizes the number of shares executed between the Continuous Book 10 and Auction Book 11 in the Opening Auction.12 In the event of a volume based tie at multiple price levels, the Opening Auction price is the price that results in the minimum total imbalance. In the event of a volume based tie and a tie in minimum total imbalance at multiple price levels, the Opening Auction price is the price closest to the Volume Based Tie Breaker.13 The Volume Based Tie Breaker for an Opening Auction is the midpoint of the NBBO 14 where there is a Valid NBBO; 15 where there is no Valid NBBO, the Volume Based Tie Breaker is the Final Last Sale Eligible Trade (‘‘FLSET’’).16 The Exchange 9 ‘‘Collar Price Range’’ is defined in BZX Rule 11.23(a)(6) as ‘‘the range from a set percentage below the Collar Midpoint (as defined below) to above the Collar Midpoint, such set percentage being dependent on the value of the Collar Midpoint at the time of the auction, as described below. The Collar Midpoint will be the Volume Based Tie Breaker for all applicable auctions, except for IPO Auctions in ETPs (as defined in Rule 11.8, Interpretation and Policy .02(d)(2)), for which the Collar Midpoint will be the issue price. Specifically, the Collar Price Range will be determined as follows: where the Collar Midpoint is $25.00 or less, the Collar Price Range shall be the range from 10% below the Collar Midpoint to 10% above the Collar Midpoint; where the Collar Midpoint is greater than $25.00 but less than or equal to $50.00, the Collar Price Range shall be the range from 5% below the Collar Midpoint to 5% above the Collar Midpoint; and where the Collar Midpoint is greater than $50.00, the Collar Price Range shall be the range from 3% below the Collar Midpoint to 3% above the Collar Midpoint.’’ 10 ‘‘Continuous Book’’ is defined in BZX Rule 11.23(a)(7) as ‘‘all orders on the BZX Book that are not Eligible Auction Orders.’’ 11 ‘‘Auction Book’’ is defined in BZX Rule 11.23(a)(1) as ‘‘all Eligible Auction Orders on the BZX Book.’’ 12 See BZX Rule 11.23(b)(2)(B) (governing the determination of the BZX Official Opening Price). 13 Volume Based Tie Breaker is defined in BZX Rule 11.23(a)(23). 14 NBBO is defined in BZX Rule 1.5(o) as ‘‘the national best bid or offer.’’ 15 Valid NBBO is defined in BZX Rule 11.23(a)(23) as an NBBO where: ‘‘(i) there is both a NBB and NBO for the security; (ii) the NBBO is not crossed; and (iii) the midpoint of the NBBO is less than the Maximum Percentage away from both the NBB and the NBO.’’ The Maximum Percentage will be determined by the Exchange and will be published in a circular distributed to Members with reasonable advance notice. Id. 16 FLSET is defined in BZX Rule 11.23(a)(9) as ‘‘the last round lot trade occurring during Regular Trading Hours on the Exchange if the trade was executed within the last one second prior to either the Closing Auction or, for Halt Auctions, trading in the security being halted. Where the trade was not executed within the last one second, the last round lot trade reported to the consolidated tape received by the Exchange during Regular Trading Hours and, where applicable, prior to trading in the VerDate Sep<11>2014 16:29 Nov 28, 2022 Jkt 259001 estimates that there is no Valid NBBO for approximately 5.81% of Opening Auctions.17 According to the Exchange, because the FLSET is typically based on the most recent execution in a security during Regular Trading Hours,18 its value may be significantly away from the Indicative Price 19 at the time of the Opening Auction Process, especially in more thinly traded securities.20 The Exchange states that it: (1) has observed instances where auction eligible orders priced in-line with the Indicative Price were not executed in the Opening Auction because they were outside the Collar Price Range established using the FLSET; and (2) believes that certain of these instances resulted in orders not receiving executions in the Opening Auction that would have otherwise occurred at prices that would have been acceptable to both parties.21 To support this, BZX states that, from January 1, 2022 through July 12, 2022, across 73,927 total Opening Auctions in BZXlisted securities, (1) there were 324 instances in which Market-On-Open (‘‘MOO’’) orders 22 did not receive an execution in the Opening Auction and were thus cancelled; (2) in 168 of those instances, the Opening Auction would have been extended under the proposed changes to the BZX Opening Process; and (3) 10,936 shares could have potentially received an execution.23 B. Proposed Changes to the Opening Auction Process The Exchange proposes to change its Opening Auction functionality only in the following circumstances: where (1) there is an Indicative Price, (2) there is not a Valid NBBO, and (3) the Indicative Price is not within the FLSETestablished Collar Price Range.24 In security being halted will be used. If there is no qualifying trade for the current day, the BZX Official Closing Price from the previous trading day will be used.’’ 17 See Notice, supra note 3, 87 FR at 53515, n.12. 18 Regular Trading Hours is defined in BZX Rule 1.5(w) as ‘‘the time between 9:30 a.m. and 4:00 p.m. Eastern Time.’’ 19 Indicative Price is defined in BZX Rule 11.23(a)(10) as ‘‘the price at which the most shares from the Auction Book and the Continuous Book would match. In the event of a volume based tie at multiple price levels, the Indicative Price will be the price which results in the minimum total imbalance. In the event of a volume based tie and a tie in minimum total imbalance at multiple price levels, the Indicative Price will be the price closest to the Volume Based Tie Breaker.’’ 20 See id. at 53515. 21 See id. 22 For reasons explained in the Notice, BZX uses unexecuted MOO orders in Opening Auctions as a proxy for crossed-interest that went unexecuted. 23 See id. at 53519. 24 See id. at 53516. PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 these circumstances, BZX proposes to delay the Opening Auction as follows. 1. BZX would delay the Opening Auction for one second. If after that delay there is a Valid NBBO or the Indicative Price is within the Collar Price Range, the Opening Auction price would be established pursuant to the Standard Opening Auction Process.25 If there is no Valid NBBO and the Indicative Price is not within the Collar Price Range after the one-second delay, the Opening Auction would be delayed by one additional second, at which point if there is a Valid NBBO or the Indicative Price is within the Collar Price Range, the Opening Auction price would be established pursuant to the Standard Opening Process. If after the additional one-second delay there is no Valid NBBO or the Indicative Price is not within the Collar Price Range, the process would continue to be applied in one-second increments until either the Opening Auction occurs or until five seconds has lapsed (i.e., 9:30:05 a.m.). 2. If the Opening Auction has not occurred by 9:30:05, the System would widen the Collar Price Range in the direction of the Indicative Price by 5% of the Volume Based Tie Breaker, which would be the FLSET as of 9:30:05 a.m. (‘‘Widening Amount’’).26 The System would check to see whether the Indicative Price is inside the widened Collar Price Range every second between 9:30:05 and 9:30:30 a.m. a. If the Indicative Price is within the widened Collar Price Range, the Opening Auction price would be established pursuant to the Standard Opening Auction Process. b. If the Indicative Price is not within the widened Collar Price Range, the Opening Auction would be further delayed, as discussed below. 3. If by 9:30:30 a.m. the Indicative Price is not within the widened Collar Price Range, the Collar Price Range would again widen by the Widening Amount. The System would check to see whether the Indicative Price is inside the widened Collar Price Range every second between 9:30:30 and 9:31:30 a.m. a. If an Indicative Price is inside the widened Collar Price Range during a check, the Opening Auction price would be established pursuant to the Standard Opening Auction Process. 25 Proposed Rule 11.23(b)(2)(B)(i) defines the ‘‘Standard Opening Process,’’ which mirrors the existing process described in Rule 11.23(b)(2)(B). 26 The Widening Amount would be locked-in as of 9:30:05, and will not change between 9:30:05 and 9:34:30 even in the event that a round lot trade reported to the consolidated tape was received by the Exchange during that time (i.e., a FLSET). E:\FR\FM\29NON1.SGM 29NON1 Federal Register / Vol. 87, No. 228 / Tuesday, November 29, 2022 / Notices b. If the Indicative Price is not within the widened Collar Price Range, the Opening Auction would be further delayed, as discussed below. 4. If by 9:31:30 a.m. the Indicative Price is not within the widened Collar Price Range, the System will check to see whether the Indicative Price is inside the widened Collar Price Range every second between 9:31:30 and 9:34:30 a.m. a. If an Indicative Price is inside the widened Collar Price Range during a check, the Opening Auction price would be established pursuant to the Standard Opening Auction Process. b. Unless the Opening Auction has occurred, the Collar Price Range would widen in the direction of the Indicative Price by the Widening Amount each minute from 9:31:30 to 9:34:30. 5. If no Opening Auction has occurred by 9:34:30 a.m., the Opening Auction would occur pursuant to the Standard Opening Auction Process using the expanded Collar Price Range as of 9:34:30. In summary, the Opening Auction would be delayed until either: (1) the NBBO becomes a Valid NBBO; (2) the Indicative Price is within the Collar Price Range (i.e., if the Opening Auction occurred between 9:30:01 and 9:30:05) or within the widened Collar Price Range (i.e., if the Opening Auction occurred between 9:30:06 and 9:34:30); (3) there no longer is an Indicative Price; 27 or (4) four minutes and 30 seconds elapsed. BZX states that these modifications are designed to prevent the cancellation of auction eligible orders priced equally or more aggressive than the Indicative Price, which the Exchange believes would facilitate the presence of sufficient liquidity and information to make the Opening Auction a meaningful price formation event in BZX-listed securities.28 C. The BZX Official Opening Price and Limit Up Limit Down Bands khammond on DSKJM1Z7X2PROD with NOTICES The Exchange states that ending the Opening Auction Process at or before 9:34:30 a.m. would ensure that the Exchange is able to disseminate the BZX Official Opening Price with sufficient time to be used to calculate the initial limit up-limit down (‘‘LULD’’) bands, and that the price of executions occurring during the proposed delay price would provide a better foundation for the initial LULD bands.29 BZX asserts that the expected benefit of allowing crossed auction interest to execute at the best possible price outweighs the minimal and finite delay (up to four minutes and 30 seconds) in the dissemination of the BZX Opening Price and LULD bands. BZX argues that this tradeoff currently exists in the national market system: the New York Stock Exchange LLC (‘‘NYSE’’) may delay its opening process indefinitely.30 Further, the Exchange states that the possible risks resulting from delaying dissemination of the LULD bands would be mitigated by the infrequency with which LULD halts occur within the first four minutes and 30 seconds of the trading day.31 II. Proceedings To Determine Whether To Approve or Disapprove SR– CboeBZX–2022–045 and Grounds for Disapproval Under Consideration The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Act 32 to determine whether the proposed rule change should be approved or disapproved. Institution of proceedings is appropriate at this time in view of the legal and policy issues raised by the proposal. Institution of proceedings does not indicate that the Commission has reached any conclusions with respect to any of the issues involved. Rather, as described below, the Commission seeks and encourages interested persons to provide additional comment on the proposed rule change. Pursuant to section 19(b)(2)(B) of the Act,33 the Commission is providing notice of the grounds for disapproval under consideration. As described above, the Exchange has proposed to amend the Opening Auction Process Provided Under Rule 11.23(b)(2)(B). In certain cases, the proposed Opening Auction Process would result in a delay in the calculation of the BZX Official Opening Price, which in most cases is the reference price for initial LULD price bands for BZX-listed securities. The Commission is instituting proceedings to allow for additional analysis of, and input from commenters with respect to, the consistency of the 29 See 27 If after each one-second delay there is no longer an Indicative Price (i.e., there is no longer crossed interest), the Opening Auction would occur immediately pursuant to proposed Rule 11.23(2)(B)(v), which would result in the BZX Official Opening Price being the FLSET, which would be the previous BZX Official Closing Price unless a FLSET occurred after 9:30:00. 28 See id. at 53516. VerDate Sep<11>2014 16:29 Nov 28, 2022 Jkt 259001 id. at 53517, 53520. id. at 53515. 31 According to the Exchange, during the period of June 1, 2021 through May 31, 2022, a LULD halt occurred in BZX-listed symbols during the first four minutes and 30 seconds of the trading day roughly 0.01% of the time (15/134,615). See id. at 53519, 53520, n.38. 32 15 U.S.C. 78s(b)(2)(B). 33 Id. 30 See PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 73369 proposal with sections 6(b)(5) 34 and 6(b)(8) 35 of the Act. Section 6(b)(5) of the Act requires that the rules of a national securities exchange be designed, among other things, to promote just and equitable principles of trade, 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, and not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. Section 6(b)(8) of the Act requires that the rules of a national securities exchange not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. III. Procedure: Request for Written Comments The Commission requests that interested persons provide written submissions of their data, views, and arguments with respect to the issues identified above, as well as any other concerns they may have with the proposal. In particular, the Commission invites the written views of interested persons concerning whether the proposed rule change is consistent with section 6(b)(5), 6(b)(8), or any other provision of the Act, or the rules and regulations thereunder. Although there do not appear to be any issues relevant to approval or disapproval that would be facilitated by an oral presentation of data, views, and arguments, the Commission will consider, pursuant to Rule 19b–4 under the Act,36 any request for an opportunity to make an oral presentation.37 Interested persons are invited to submit written data, views, and arguments regarding whether the proposed rule change should be approved or disapproved by December 20, 2022. Any person who wishes to file a rebuttal to any other person’s submission must file that rebuttal by January 3, 2023. The Commission asks that commenters address the sufficiency of the Exchange’s statements in support of the proposal and any other issues raised 34 15 U.S.C. 78f(b)(5). U.S.C. 78f(b)(8). 36 17 CFR 240.19b–4. 37 Section 19(b)(2) of the Act, as amended by the Securities Acts Amendments of 1975, Public Law 94–29 (June 4, 1975), grants to the Commission flexibility to determine what type of proceeding— either oral or notice and opportunity for written comments—is appropriate for consideration of a particular proposal by a self-regulatory organization. See Securities Acts Amendments of 1975, Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975). 35 15 E:\FR\FM\29NON1.SGM 29NON1 khammond on DSKJM1Z7X2PROD with NOTICES 73370 Federal Register / Vol. 87, No. 228 / Tuesday, November 29, 2022 / Notices submit only information that you wish to make available publicly. All submissions should refer to File No. SR–CboeBZX–2022–045 and should be submitted BY December 20, 2022. Rebuttal comments should be submitted by January 3, 2023. by the proposed rule change under the Act. In this regard, the Commission seeks commenters’ views regarding whether a delay in the calculation of the BZX Official Opening Price would affect the trading of BZX-listed securities or would impact any processes that rely on the calculation of the BZX Official Opening Price, including the calculation and dissemination of initial LULD price bands. The Commission also seeks comment on the sufficiency of the Exchange’s quantitative support for the proposal (including any intereprations thereof) and whether any additional data would be useful in evaulating the consistency of the proposed rule change with the Act. Comments may be submitted by any of the following methods: For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.38 Sherry R. Haywood, Secretary. Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule–comments@ sec.gov. Please include File No. SR– CboeBZX–2022–045 on the subject line. Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 104 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–CboeBZX–2022–045. The 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 VerDate Sep<11>2014 16:29 Nov 28, 2022 Jkt 259001 [FR Doc. 2022–26051 Filed 11–28–22; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–96377; File No. SR–NYSE– 2022–52] November 22, 2022. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on November 14, 2022, New York Stock Exchange LLC (‘‘NYSE’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. 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 to amend Rule 104 (Dealings and Responsibilities of DMMs) to correct a cross-reference in subsection (c)(5). The proposed rule change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, 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 self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change 38 17 CFR 200.30–3(a)(57). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 and discussed any comments it received on the proposed rule change. The text of those 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 parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend Rule 104 to correct a cross-reference in subsection (c)(5). Rule 104(c)(5) provides that ‘‘[t]he requirements Rule 104(f)(2) and (3) will be operative with respect to ETPs upon implementation of the applicable Depth Guidelines by the Exchange, but in any event no later than eighteen weeks after ETPs listed on the Exchange pursuant to Rules 5P and 8P begin trading.’’ The correct reference should be to Rule 104(c)(2) and (3). Current Rule 104(c), titled ‘‘Functions of DMMs’’, was formerly Rule 104(f). Earlier this year, the Exchange re-numbered Rule 104(f), which became current Rule 104(c).3 As part of that filing, the Exchange inadvertently failed to update the reference to ‘‘the requirements of Rule 104(f)(2) and (3)’’ in current Rule 104(c).4 The Exchange accordingly proposes to correct the cross-reference in Rule 104(c)(5) by replacing ‘‘f’’ with ‘‘c’’. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b)(5) of the Exchange Act,5 in that it is 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 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. The Exchange believes that the proposed change to Rule 104(c)(5) to correct a cross-reference to a previously renumbered subsection would remove impediments to and perfect the 3 See Securities Exchange Act Release No. 95691 (September 7, 2022), 87 FR 56099 (September 13, 2022) (SR–NYSE–2022–32) (Order Approving a Proposed Rule Change To Amend NYSE Rule 7.35B Relating to the Closing Auction and Make Certain Conforming and Non-Substantive Changes to NYSE Rules 7.31, 7.35, 7.35B and 104). 4 15 U.S.C. 78f(b). 5 15 U.S.C. 78f(b)(5). E:\FR\FM\29NON1.SGM 29NON1

Agencies

[Federal Register Volume 87, Number 228 (Tuesday, November 29, 2022)]
[Notices]
[Pages 73367-73370]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-26051]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96384; File No. SR-CboeBZX-2022-045]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order 
Instituting Proceedings To Determine Whether To Approve or Disapprove a 
Proposed Rule Change To Amend the Opening Auction Process Provided 
Under Rule 11.23(b)(2)(B)

November 23, 2022.
    On August 15, 2022, Cboe BZX Exchange, Inc. (``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend the Opening Auction process provided 
under Rule 11.23(b)(2)(B). The proposed rule change was published for 
comment in the Federal Register on August 31, 2022.\3\ On October 12, 
2022, 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.\5\ The 
Commission has received no comments on the proposed rule change. This 
order institutes proceedings under section 19(b)(2)(B) of the Act \6\ 
to determine whether to approve or disapprove the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 95601 (Aug. 25, 
2022), 87 FR 53514 (``Notice'').
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 96038, 87 FR 63115 
(Oct. 18, 2022). The Commission designated November 29, 2022 as the 
date by which the Commission shall approve or disapprove, or 
institute proceedings to determine whether to disapprove, the 
proposed rule change.
    \6\ 15 U.S.C. 78s(b)(2)(B).
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I. Summary of the Proposed Rule Change 7
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    \7\ For a full description of all aspects of the proposed rule 
change, including BZX's justification for it, please see the Notice, 
supra note 3.
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    BZX holds an Opening Auction for each security listed on the 
Exchange. During an Opening Auction, all executions, if any, occur at a 
single price, and that price must be within a certain range established 
by the Exchange. The Exchange proposes to amend its Opening Auction 
process by, under certain circumstances, delaying the Opening Auction 
and if necessary gradually widening the bands within which the Opening 
Auction price must fall. The Exchange also proposes associated changes 
reflecting the proposed modifications to its process.\8\
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    \8\ For example, the Exchnage proposes to amend BZX Rules 
11.23(b)(1)(A) and (B), to reflect that the Opening Auction may 
occur at a time other than 9:30 a.m. It also proposes to amend BZX 
Rule 11.23(b)(1)(B) to provide that Eligible Auction Orders 
designated for the Opening Auction may not be cancelled or modified 
from 9:28 a.m. until the Opening Auction has concluded except that 
Regular Hours Only (``RHO'') limit orders designated for the Opening 
Auction may be modified, but not cancelled, from 9:28 a.m. until the 
time the Opening Auction has concluded. Any such RHO limit orders 
modified from 9:28 a.m. until the Opening Auction has concluded 
would be treated as late-limit-on-open orders.

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[[Page 73368]]

A. The Current Opening Auction Process

    Each Opening Auction price is the price level within the Collar 
Price Range \9\ that maximizes the number of shares executed between 
the Continuous Book \10\ and Auction Book \11\ in the Opening 
Auction.\12\ In the event of a volume based tie at multiple price 
levels, the Opening Auction price is the price that results in the 
minimum total imbalance. In the event of a volume based tie and a tie 
in minimum total imbalance at multiple price levels, the Opening 
Auction price is the price closest to the Volume Based Tie Breaker.\13\ 
The Volume Based Tie Breaker for an Opening Auction is the midpoint of 
the NBBO \14\ where there is a Valid NBBO; \15\ where there is no Valid 
NBBO, the Volume Based Tie Breaker is the Final Last Sale Eligible 
Trade (``FLSET'').\16\ The Exchange estimates that there is no Valid 
NBBO for approximately 5.81% of Opening Auctions.\17\
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    \9\ ``Collar Price Range'' is defined in BZX Rule 11.23(a)(6) as 
``the range from a set percentage below the Collar Midpoint (as 
defined below) to above the Collar Midpoint, such set percentage 
being dependent on the value of the Collar Midpoint at the time of 
the auction, as described below. The Collar Midpoint will be the 
Volume Based Tie Breaker for all applicable auctions, except for IPO 
Auctions in ETPs (as defined in Rule 11.8, Interpretation and Policy 
.02(d)(2)), for which the Collar Midpoint will be the issue price. 
Specifically, the Collar Price Range will be determined as follows: 
where the Collar Midpoint is $25.00 or less, the Collar Price Range 
shall be the range from 10% below the Collar Midpoint to 10% above 
the Collar Midpoint; where the Collar Midpoint is greater than 
$25.00 but less than or equal to $50.00, the Collar Price Range 
shall be the range from 5% below the Collar Midpoint to 5% above the 
Collar Midpoint; and where the Collar Midpoint is greater than 
$50.00, the Collar Price Range shall be the range from 3% below the 
Collar Midpoint to 3% above the Collar Midpoint.''
    \10\ ``Continuous Book'' is defined in BZX Rule 11.23(a)(7) as 
``all orders on the BZX Book that are not Eligible Auction Orders.''
    \11\ ``Auction Book'' is defined in BZX Rule 11.23(a)(1) as 
``all Eligible Auction Orders on the BZX Book.''
    \12\ See BZX Rule 11.23(b)(2)(B) (governing the determination of 
the BZX Official Opening Price).
    \13\ Volume Based Tie Breaker is defined in BZX Rule 
11.23(a)(23).
    \14\ NBBO is defined in BZX Rule 1.5(o) as ``the national best 
bid or offer.''
    \15\ Valid NBBO is defined in BZX Rule 11.23(a)(23) as an NBBO 
where: ``(i) there is both a NBB and NBO for the security; (ii) the 
NBBO is not crossed; and (iii) the midpoint of the NBBO is less than 
the Maximum Percentage away from both the NBB and the NBO.'' The 
Maximum Percentage will be determined by the Exchange and will be 
published in a circular distributed to Members with reasonable 
advance notice. Id.
    \16\ FLSET is defined in BZX Rule 11.23(a)(9) as ``the last 
round lot trade occurring during Regular Trading Hours on the 
Exchange if the trade was executed within the last one second prior 
to either the Closing Auction or, for Halt Auctions, trading in the 
security being halted. Where the trade was not executed within the 
last one second, the last round lot trade reported to the 
consolidated tape received by the Exchange during Regular Trading 
Hours and, where applicable, prior to trading in the security being 
halted will be used. If there is no qualifying trade for the current 
day, the BZX Official Closing Price from the previous trading day 
will be used.''
    \17\ See Notice, supra note 3, 87 FR at 53515, n.12.
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    According to the Exchange, because the FLSET is typically based on 
the most recent execution in a security during Regular Trading 
Hours,\18\ its value may be significantly away from the Indicative 
Price \19\ at the time of the Opening Auction Process, especially in 
more thinly traded securities.\20\ The Exchange states that it: (1) has 
observed instances where auction eligible orders priced in-line with 
the Indicative Price were not executed in the Opening Auction because 
they were outside the Collar Price Range established using the FLSET; 
and (2) believes that certain of these instances resulted in orders not 
receiving executions in the Opening Auction that would have otherwise 
occurred at prices that would have been acceptable to both parties.\21\ 
To support this, BZX states that, from January 1, 2022 through July 12, 
2022, across 73,927 total Opening Auctions in BZX-listed securities, 
(1) there were 324 instances in which Market-On-Open (``MOO'') orders 
\22\ did not receive an execution in the Opening Auction and were thus 
cancelled; (2) in 168 of those instances, the Opening Auction would 
have been extended under the proposed changes to the BZX Opening 
Process; and (3) 10,936 shares could have potentially received an 
execution.\23\
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    \18\ Regular Trading Hours is defined in BZX Rule 1.5(w) as 
``the time between 9:30 a.m. and 4:00 p.m. Eastern Time.''
    \19\ Indicative Price is defined in BZX Rule 11.23(a)(10) as 
``the price at which the most shares from the Auction Book and the 
Continuous Book would match. In the event of a volume based tie at 
multiple price levels, the Indicative Price will be the price which 
results in the minimum total imbalance. In the event of a volume 
based tie and a tie in minimum total imbalance at multiple price 
levels, the Indicative Price will be the price closest to the Volume 
Based Tie Breaker.''
    \20\ See id. at 53515.
    \21\ See id.
    \22\ For reasons explained in the Notice, BZX uses unexecuted 
MOO orders in Opening Auctions as a proxy for crossed-interest that 
went unexecuted.
    \23\ See id. at 53519.
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B. Proposed Changes to the Opening Auction Process

    The Exchange proposes to change its Opening Auction functionality 
only in the following circumstances: where (1) there is an Indicative 
Price, (2) there is not a Valid NBBO, and (3) the Indicative Price is 
not within the FLSET-established Collar Price Range.\24\ In these 
circumstances, BZX proposes to delay the Opening Auction as follows.
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    \24\ See id. at 53516.
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    1. BZX would delay the Opening Auction for one second. If after 
that delay there is a Valid NBBO or the Indicative Price is within the 
Collar Price Range, the Opening Auction price would be established 
pursuant to the Standard Opening Auction Process.\25\ If there is no 
Valid NBBO and the Indicative Price is not within the Collar Price 
Range after the one-second delay, the Opening Auction would be delayed 
by one additional second, at which point if there is a Valid NBBO or 
the Indicative Price is within the Collar Price Range, the Opening 
Auction price would be established pursuant to the Standard Opening 
Process. If after the additional one-second delay there is no Valid 
NBBO or the Indicative Price is not within the Collar Price Range, the 
process would continue to be applied in one-second increments until 
either the Opening Auction occurs or until five seconds has lapsed 
(i.e., 9:30:05 a.m.).
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    \25\ Proposed Rule 11.23(b)(2)(B)(i) defines the ``Standard 
Opening Process,'' which mirrors the existing process described in 
Rule 11.23(b)(2)(B).
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    2. If the Opening Auction has not occurred by 9:30:05, the System 
would widen the Collar Price Range in the direction of the Indicative 
Price by 5% of the Volume Based Tie Breaker, which would be the FLSET 
as of 9:30:05 a.m. (``Widening Amount'').\26\ The System would check to 
see whether the Indicative Price is inside the widened Collar Price 
Range every second between 9:30:05 and 9:30:30 a.m.
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    \26\ The Widening Amount would be locked-in as of 9:30:05, and 
will not change between 9:30:05 and 9:34:30 even in the event that a 
round lot trade reported to the consolidated tape was received by 
the Exchange during that time (i.e., a FLSET).
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    a. If the Indicative Price is within the widened Collar Price 
Range, the Opening Auction price would be established pursuant to the 
Standard Opening Auction Process.
    b. If the Indicative Price is not within the widened Collar Price 
Range, the Opening Auction would be further delayed, as discussed 
below.
    3. If by 9:30:30 a.m. the Indicative Price is not within the 
widened Collar Price Range, the Collar Price Range would again widen by 
the Widening Amount. The System would check to see whether the 
Indicative Price is inside the widened Collar Price Range every second 
between 9:30:30 and 9:31:30 a.m.
    a. If an Indicative Price is inside the widened Collar Price Range 
during a check, the Opening Auction price would be established pursuant 
to the Standard Opening Auction Process.

[[Page 73369]]

    b. If the Indicative Price is not within the widened Collar Price 
Range, the Opening Auction would be further delayed, as discussed 
below.
    4. If by 9:31:30 a.m. the Indicative Price is not within the 
widened Collar Price Range, the System will check to see whether the 
Indicative Price is inside the widened Collar Price Range every second 
between 9:31:30 and 9:34:30 a.m.
    a. If an Indicative Price is inside the widened Collar Price Range 
during a check, the Opening Auction price would be established pursuant 
to the Standard Opening Auction Process.
    b. Unless the Opening Auction has occurred, the Collar Price Range 
would widen in the direction of the Indicative Price by the Widening 
Amount each minute from 9:31:30 to 9:34:30.
    5. If no Opening Auction has occurred by 9:34:30 a.m., the Opening 
Auction would occur pursuant to the Standard Opening Auction Process 
using the expanded Collar Price Range as of 9:34:30.
    In summary, the Opening Auction would be delayed until either: (1) 
the NBBO becomes a Valid NBBO; (2) the Indicative Price is within the 
Collar Price Range (i.e., if the Opening Auction occurred between 
9:30:01 and 9:30:05) or within the widened Collar Price Range (i.e., if 
the Opening Auction occurred between 9:30:06 and 9:34:30); (3) there no 
longer is an Indicative Price; \27\ or (4) four minutes and 30 seconds 
elapsed.
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    \27\ If after each one-second delay there is no longer an 
Indicative Price (i.e., there is no longer crossed interest), the 
Opening Auction would occur immediately pursuant to proposed Rule 
11.23(2)(B)(v), which would result in the BZX Official Opening Price 
being the FLSET, which would be the previous BZX Official Closing 
Price unless a FLSET occurred after 9:30:00.
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    BZX states that these modifications are designed to prevent the 
cancellation of auction eligible orders priced equally or more 
aggressive than the Indicative Price, which the Exchange believes would 
facilitate the presence of sufficient liquidity and information to make 
the Opening Auction a meaningful price formation event in BZX-listed 
securities.\28\
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    \28\ See id. at 53516.
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C. The BZX Official Opening Price and Limit Up Limit Down Bands

    The Exchange states that ending the Opening Auction Process at or 
before 9:34:30 a.m. would ensure that the Exchange is able to 
disseminate the BZX Official Opening Price with sufficient time to be 
used to calculate the initial limit up-limit down (``LULD'') bands, and 
that the price of executions occurring during the proposed delay price 
would provide a better foundation for the initial LULD bands.\29\
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    \29\ See id. at 53517, 53520.
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    BZX asserts that the expected benefit of allowing crossed auction 
interest to execute at the best possible price outweighs the minimal 
and finite delay (up to four minutes and 30 seconds) in the 
dissemination of the BZX Opening Price and LULD bands. BZX argues that 
this tradeoff currently exists in the national market system: the New 
York Stock Exchange LLC (``NYSE'') may delay its opening process 
indefinitely.\30\ Further, the Exchange states that the possible risks 
resulting from delaying dissemination of the LULD bands would be 
mitigated by the infrequency with which LULD halts occur within the 
first four minutes and 30 seconds of the trading day.\31\
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    \30\ See id. at 53515.
    \31\ According to the Exchange, during the period of June 1, 
2021 through May 31, 2022, a LULD halt occurred in BZX-listed 
symbols during the first four minutes and 30 seconds of the trading 
day roughly 0.01% of the time (15/134,615). See id. at 53519, 53520, 
n.38.
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II. Proceedings To Determine Whether To Approve or Disapprove SR-
CboeBZX-2022-045 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \32\ to determine whether the proposed rule 
change should be approved or disapproved. Institution of proceedings is 
appropriate at this time in view of the legal and policy issues raised 
by the proposal. Institution of proceedings does not indicate that the 
Commission has reached any conclusions with respect to any of the 
issues involved. Rather, as described below, the Commission seeks and 
encourages interested persons to provide additional comment on the 
proposed rule change.
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    \32\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to section 19(b)(2)(B) of the Act,\33\ the Commission is 
providing notice of the grounds for disapproval under consideration. As 
described above, the Exchange has proposed to amend the Opening Auction 
Process Provided Under Rule 11.23(b)(2)(B). In certain cases, the 
proposed Opening Auction Process would result in a delay in the 
calculation of the BZX Official Opening Price, which in most cases is 
the reference price for initial LULD price bands for BZX-listed 
securities.
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    \33\ Id.
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    The Commission is instituting proceedings to allow for additional 
analysis of, and input from commenters with respect to, the consistency 
of the proposal with sections 6(b)(5) \34\ and 6(b)(8) \35\ of the Act. 
Section 6(b)(5) of the Act requires that the rules of a national 
securities exchange be designed, among other things, to promote just 
and equitable principles of trade, 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, and not 
be designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers. Section 6(b)(8) of the Act requires that the rules 
of a national securities exchange not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act.
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    \34\ 15 U.S.C. 78f(b)(5).
    \35\ 15 U.S.C. 78f(b)(8).
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III. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their data, views, and arguments with respect to the 
issues identified above, as well as any other concerns they may have 
with the proposal. In particular, the Commission invites the written 
views of interested persons concerning whether the proposed rule change 
is consistent with section 6(b)(5), 6(b)(8), or any other provision of 
the Act, or the rules and regulations thereunder. Although there do not 
appear to be any issues relevant to approval or disapproval that would 
be facilitated by an oral presentation of data, views, and arguments, 
the Commission will consider, pursuant to Rule 19b-4 under the Act,\36\ 
any request for an opportunity to make an oral presentation.\37\
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    \36\ 17 CFR 240.19b-4.
    \37\ Section 19(b)(2) of the Act, as amended by the Securities 
Acts Amendments of 1975, Public Law 94-29 (June 4, 1975), grants to 
the Commission flexibility to determine what type of proceeding--
either oral or notice and opportunity for written comments--is 
appropriate for consideration of a particular proposal by a self-
regulatory organization. See Securities Acts Amendments of 1975, 
Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 75, 
94th Cong., 1st Sess. 30 (1975).
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    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposed rule change should be approved 
or disapproved by December 20, 2022. Any person who wishes to file a 
rebuttal to any other person's submission must file that rebuttal by 
January 3, 2023.
    The Commission asks that commenters address the sufficiency of the 
Exchange's statements in support of the proposal and any other issues 
raised

[[Page 73370]]

by the proposed rule change under the Act. In this regard, the 
Commission seeks commenters' views regarding whether a delay in the 
calculation of the BZX Official Opening Price would affect the trading 
of BZX-listed securities or would impact any processes that rely on the 
calculation of the BZX Official Opening Price, including the 
calculation and dissemination of initial LULD price bands. The 
Commission also seeks comment on the sufficiency of the Exchange's 
quantitative support for the proposal (including any intereprations 
thereof) and whether any additional data would be useful in evaulating 
the consistency of the proposed rule change 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 No. SR-CboeBZX-2022-045 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-CboeBZX-2022-045. The 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 No. SR-CboeBZX-2022-045 and should be submitted BY 
December 20, 2022. Rebuttal comments should be submitted by January 3, 
2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\38\
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    \38\ 17 CFR 200.30-3(a)(57).
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Sherry R. Haywood,
Secretary.
[FR Doc. 2022-26051 Filed 11-28-22; 8:45 am]
BILLING CODE 8011-01-P
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